Tilman J. Fertitta, the Texas billionaire and restaurateur, agreed to buy Morton’s Restaurant Group Inc. for $116.6 million, adding the high-end steakhouse chain to his portfolio of dining brands.
The offer of $6.90 a share in cash is 34 percent more than yesterday’s closing price, Fertitta, who already owned 5 percent of Morton’s shares, said today in a statement. The deal is scheduled to be completed in February and will be financed through cash and debt.
Fertitta, the chief executive offer of restaurant company Landry’s Inc., has a history of buying struggling eateries. In November, Houston-based Landry’s agreed to buy McCormick & Schmick’s Seafood Restaurants Inc. for about $131.6 million after terminating an earlier offer. Landry’s also owns the Rainforest Cafe and Bubba Gump Shrimp Co. chains.
“He got it at a cheap price if he’s able to improve the current mediocre business model,” Bryan Elliott, an analyst at Raymond James & Associates in St. Petersburg, Florida, said in an interview. Fertitta will need to modernize Morton’s because it’s “stuck a bit in a time warp,” he said.
Morton’s, based in Chicago, rose 33 percent to $6.85 at the close in New York. The shares have gained 5.7 percent this year.
The offer values Morton’s at 7.36 times earnings before interest, taxes, depreciation and amortization, less than the 8.24 times the average of 59 pending or completed restaurant deals for which such data is available in the past five years, according to Bloomberg data.
Morton’s, which opened its first restaurant in Chicago in 1978, said in March it was exploring a possible sale to boost shareholder value. The steakhouse increased menu prices last December and in January to help counter surging meat prices.
As part of the deal, Castle Harlan Partners III LP has agreed to tender the 28 percent of the shares it owns.
Earlier this year, Fertitta, 54, bought the Trump Marina Hotel Casino in Atlantic City for $38 million with plans to refurbish the resort and change its name to Golden Nugget. Landry’s owns hotels in Las Vegas and Texas, as well as amusement parks.
Morton’s Chief Executive Officer Christopher Artinian, who worked his way up after starting in the company’s kitchens, has sought to bring in younger diners with happy hour specials and a more affordable wine list. Sales rose 5.3 percent to $296.1 million in the year ended Jan. 2 after two years of declines.
The original Morton’s in downtown Chicago, which serves filet mignon, lamb chops and whole lobsters from Maine, is blocks from rivals Gibsons Bar & Steakhouse and Tavern on Rush. The dining spot organizes winemaker dinners for $150 a person and brings in football and baseball stars to serve four-course meals during celebrity dining events.
Morton’s was taken private by buyout firm Castle Harlan for $71.2 million in 2002 after a bidding contest with billionaire financier Carl Icahn. The company sold shares to the public four years later.
The chain was founded by Klaus Fritsch and Arnie Morton, according to its website. The company owns and operates 77 of the namesake steakhouses in 64 cities across 26 states as well as six international locations, according to the statement.