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A Surf-and-Turf Combo?

The Landry's seafood chain aims to expand its restaurant portfolio with a bid for NYC steakhouse Smith & Wollensky

Landry's Restaurants (LNY) Chief Executive Tilman Fertitta is trying to increase his company's cachet with yet another acquisition. He announced on Jan. 16 that he wants to buy the high-end restaurant operator Smith & Wollensky Restaurant Group (SWRG) for about $64.4 million.

"We believe that a combination of the two companies would be in the best interest of the stockholders of both companies," Fertitta said in a press release.

Fertitta, a Houston entrepreneur, grew up peeling shrimp and waiting tables at his father's surfside eatery in Galveston, Tex. He is no stranger to advancement through acquisition of new properties. He started out as a partner in the first Landry's Seafood House Restaurant, which opened in 1980 in Katy, Tex., as well as in Willie G's Seafood & Steak House in nearby Houston. Since acquiring a controlling interest in both restaurants in 1986, he's bought a slew of additional companies over the years. Recent purchases include the Chart House restaurants in 2002 and the Holiday Inn on the Beach the following year.

Landry's current target, Smith & Wollensky, opened as a traditional New York steakhouse in 1977. Now, the company includes restaurants in numerous major U.S. cities as well as Cite, Maloney & Porcelli, Park Avenue Cafe, Quality Meats, and The Post House.

Investors Approve

Fertitta is offering $7.50 per share in cash for Smith & Wollensky, representing roughly a 50% premium to the company's market price of $5.03 per share, as of the close of business on Jan. 12. This offer isn't his first attempt. Fertitta had spoken with Smith & Wollensky's management about a deal, but those discussions ended before Landry submitted its formal proposal to the Smith & Wollensky board.

Smith & Wollensky's directors met on Monday, Jan. 15, and authorized a special committee of independent directors to figure out whether Landry's offer is in the stockholders' best interest. The company hasn't yet made any decisions about a sale, and in a Jan. 1 press release called the offer "an unsolicited, highly conditional proposal."

Even so, investors were positive on both stocks after the news. Landry's shares gained 2.7% to close at $31 per share on the New York Stock Exchange. Smith & Wollensky soared to a new 52-week high of $7.45 on Tuesday, before settling nearly 45% higher at $7.29 per share on the Nasdaq.

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