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Cheesecake Factory Expresses Optimism After Getting a $200 Million Investment From Roark Capital

By Rhian Hunt - Apr 20, 2020 at 7:04PM

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The equity firm gets a seat on the board of directors in exchange.

The Cheesecake Factory (CAKE 1.29%) said in a news release this morning that it has secured a $200 million investment from the private equity firm Roark Capital, the current owner of Buffalo Wild Wings, Arby's, Cinnabon, and many other restaurant and food sector brands. The company's restaurants are currently operating only through take-out and delivery, making the investment a timely addition to its war chest.

The savory infusion of funds increases The Cheesecake Factory's liquidity at a critical juncture, as the COVID-19 shutdown continues to strongly depress U.S. restaurant sector sales. The company says the extra cash will be useful both in getting its employees back on the job and for long-term business operations. CEO David Overton declares, "We are pleased to have found a high-quality partner in Roark, who we are confident will add significant value to the Cheesecake Factory."

A slice of pumpkin cheesecake.

Image source: Getty Images.

Neal Aronson, Founder of Roark, gave a similarly upbeat commentary on the deal, expressing admiration for The Cheesecake Factory's "leadership in experiential dining." Cheesecake Factory's board of directors will grow from eight to nine members, the ninth director being Roark's president, Paul Ginsberg. The $200 million is a purchase of convertible preferred stock, enabling Roark to collect dividends and putting it in an advantageous position for cashing out or exercising its conversion rights.

The Cheesecake Factory's share price rose following the announcement, closing with a 1.1% gain and climbing modestly after hours. The company's share price still remains far below its level before the coronavirus pandemic caused a 46% drop in comparable-store sales in March, however. The stock is currently trading at around $19 per share, compared with February highs above $42 per share.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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