P.F. Chang’s Going Private (PFCB, CHUX, JAX, CMG)

Asian food eatery P.F. Chang’s China Bistro Inc. (NASDAQ: PFCB) this morning announced that it is being taken private in a deal worth $1.1 billion. The buyer is private equity firm Centerbridge Partners LP, which is paying $51.50/share for Chang’s. The price represents a 40% premium to Chang’s closing price last night.

The going-private move follows a similar deal for O’Charley’s Inc. (NASDAQ: CHUX), which agreed to a $221 buyout from Fidelity National Financial Inc. Other restaurant chains that have gotten some action, primarily from activist investors are Cracker Barrel Old Country Store Inc. (NASDAQ: CBRL) and J. Alexander’s Corp. (NASDAQ: JAX).

Chang’s also reported first quarter earnings this morning, and both revenue and EPS came in well below consensus estimates. The company reported revenues of $318.9 million versus an estimate of $321.6 million, and EPS of $0.30 versus a consensus estimate of $0.36. EPS is sharply below last year’s $0.46/share, although revenues were up about $1.5 million compared with the year-ago quarter. Adjusted EPS came in at $0.35, not that far below estimates.

The restaurant reported that same-store sales at its P.F. Chang’s Bistros were down -0.6% and down -1.7% at its Pei Wei stores, due to lower traffic.

Cracker Barrel’s management said last week in a presentation for analysts and institutional investors that it had undertaken a number of “strategic initiatives” to boost shareholder returns. J. Alexander’s adopted a poison pill in March and the company’s independent directors received a letter from Privet Fund LP, which owns 12.6% of the company, urging them to “strive to create results that advance shareholder interests.”

Whether the interest in restaurant chains is a belief that the US economy is turning around and people will begin to dine out more often, or the interest is in the chains’ real estate holdings is not entirely clear. Cracker Barrel posted a new 52-week high in late February after an activist investor started demanding better results.

P.F. Chang’s hit a trough in mid-October 2011 and is facing new competition from a chain called ShopHouse Southeast Asian Kitchen, created by Chipotle Mexican Grill Inc. (NYSE: CMG) last fall. Whether the new owners plan to compete or to sell off existing stores remains to be seen, but both options are now available where only the former was before today.

P.F. Chang’s shares are up 30% in the pre-market this morning, at $51.60.

Paul Ausick

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