Landry's Restaurants Inc. said Monday it was terminating a planned deal under which its chief executive would have taken the company private but plans to refinance $400 million in senior debt. Its shares tumbled about 34 percent in morning trading.
Landry's, which owns restaurants including Rainforest Cafe, Charley's Crab and The Chart House, said the going-private deal was scuttled because of a conflict with the Securities and Exchange Commission and its lenders about disclosing terms the lenders insisted were confidential.
By scrapping the going-private transaction, the company said it could preserve an alternative financing agreement reached with the same lenders that it expects to close by the end of February.
"Given our need to refinance approximately $400 million in senior notes, and the existing worldwide credit crisis, we felt that it was in the best interests of our stockholders to terminate the merger agreement in order to maintain the alternative financing," said Michael Chadwick, chairman of a committee formed by the company's board to evaluate the going-private deal.
Landry's had said in June that Chief Executive Tilman J. Fertitta would buy the 61 percent of the company he didn't already own.
Under terms of the planned deal, Fertitta Holdings Inc., a private equity firm formed by Fertitta to buy the company, would have bought Landry's for $21 per share in cash, a 37 percent premium above the stock's closing price April 3, the last trading day before Fertitta's offer was disclosed.
This "must be extremely disappointing to our shareholders," Chadwick said.
Landry's shares fell $4.17, or 33.7 percent, to $8.18 in morning trading Monday.
The company said Monday that the SEC was requiring it to issue a proxy statement disclosing information from a commitment letter to Fertitta Holdings from the lead lenders, Jefferies Funding LLC, Jefferies & Co., Jefferies Finance LLC and Wells Fargo Foothill. However, the commitment letter required the information be kept confidential.
The lenders said disclosure would violate the terms of their agreement and would result in terminating their commitments for both the planned going-private transaction and alternative financing transactions, according to a press release Landry's issued Monday.
If the lead lenders had pulled their commitments, there would have been no financing available for the going-private transaction and the company would have lost its alternative financing commitment from the lenders, the company said. Without the going-private transaction, no proxy will be issued, preserving the confidentiality of the alternative financing agreement until final terms are reached.
Refinancing will proceed on the company's 9.5 percent and 7.5 percent notes.