Landry's Restaurants CEO Cooks Up Another Raw Buyout Deal

For the past two years, the CEO of Landry's Restaurants (LNY), Tilman Fertitta, has been trying to take the company private, a process that has been frustrating for shareholders as the stock price has taken a roller coaster ride.

Still, there was hope that a deal would finally come at a nice premium. Instead, this week, Fertitta made yet another offer for the company -- at $21 per share or $341 million. Unfortunately, this was 16% below the company's market price.

A Messy Deal

Landry's is a national restaurant and entertainment operation, with 174 locations across 27 states. Some of its brands include Rainforest Cafe, Chart House, Saltgrass Steak House, Charley's Crab and Landry's Seafood House. The company also owns the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nev.

It was back in early 2008 that Fertitta pitched his first plan to buy Landry's, with an initial offer of $23.50 per share. But as the recession got worse, he reduced his offer to $21 per share. By September, things would deteriorate even more. Landry's had suffered losses from Hurricane Ike, and it looked like financing would be difficult to obtain because of the credit crisis. Fertitta reduced his offer again, to a mere $13.50.

At that point, the Securities and Exchange Commission intervened and wanted to review the financing documents. The banks providing financing for the deal refused, and the upshot was that the buyout offer was terminated. But eventually, those issues were resolved, and Fertitta came back to the table with a $14.75 bid in November 2009.

As should be expected, shareholders were disappointed. In fact, Pershing Square Capital Management's William Ackman purchased a 9.9% stake in Landry's and agitated for a better deal.

More Action?

The recession has taken a toll on Landry's. Last year, revenues declined from $1.144 billion to $1.06 billion. But the company has taken steps to improve its balance sheet and lower its costs. Landry's posted $178.6 million in EBITDA last year.

So while Fertitta has lots of leverage -- he owns a 55% stake in Landry's -- he will likely need to raise his bid in light of the improved conditions at the company. In fact, the current stock price is still 12% above his offer price, indicating that investors think a higher bid is in the offing.