One of the great things about consumer goods-focused private equity deals is that many recognizable companies and brands get involved. The latest one is with the famous beer, wings, and attractive servers chain Hooters of America (HOA).
To break it down, Wellspring Capital Management had made a bid for the chain last year, but the chain was then sued by one of its franchisees, a South Africa-based firm named Chanticleer Holdings, for violating the right of first refusal deal it had with a 2006 loan provided to HOA. Now, with 2 private equity firms as co-investors (KarpReilly and HIG Capital, as I found out yesterday thanks to The Deal Pipeline), Chanticleer made a $250MM bid for HOA, and Wellspring is suing for breach of contract.
PEHub has covered the deal here, and Dan Primack has covered it here. Here are my thoughts:
- I'm not surprised that HIG Capital is involved here. They aren't slowing down in terms of deals from 2010. Continue keeping an eye on them, as the Miami-based firm is slowly expanding too.
- I'm surprised that (according to Dan) HIG did the deal through its New York affiliate Bayside Capital. I wonder if their New York office was involved at all...(I know a few of the execs there)
- Dan mentioned that Hooter's is supposed to make over $1 billion in revenue while Chanticleer has a market cap of only $7MM.
I believe PEHub or the WSJ PE BeatDan wrote about the initial deal by Wellspring a few months ago, and they mentioned that many of the chains now are run by a bunch of different franchisees. By buying HOA, HIG/KR/Chanticleer is probably only getting a few chains and will have to deal with those franchisees to get more.
After all, the great Chris Rock said in his song No Sex in the Champagne Room: "Nobody goes to Hooters for the wings..."