Del Frisco’s Restaurant Group agrees to buyout by L Catterton

Much-anticipated sale of DFRG puts Barcelona, Bartaco on growth trajectory

The acquisition of Del Frisco’s Restaurant Group (DFRG), which had seemed imminent for months, is well underway. The announced agreement with L Catterton calls for an-all cash buyout of Del Frisco’s for $650M. After months of working to streamline operations, reduce costs and appease an activist investor, Del Frisco’s is put under the private leadership of a savvy investor via a L Catterton affiliate.

Private equity firm L Catterton has over $15B under investment and oversees high-profile restaurant brands in its portfolio. These brands include the likes of Uncle Julio’s, Protein Bar & Kitchen, Chop’t and Noodles & Company.

Del Frisco’s owns and operates Del Frisco’s Grille and Del Frisco’s Double Eagle Steakhouse, in addition to Barcelona Wine Bar and Bartaco, two prized restaurant brands with high-growth potential. At the end of 2018, DFRG reported total revenue of $378.2M and comparable sales growth of 0.9 percent.

DFRG’s financial decisions a catalyst for the leadup to its buyout

L Catterton pays a 22 percent premium to the closing price of Del Frisco’s stock as of December 19. Based on a strategic review, Del Frisco’s Board unanimously approved the deal, which is expected to close in Q4 2019. Engaged Capital is an activist investor that won a board seat and a cooperation agreement with the Irving, Texas-based restaurant company in February.

The activist investor had demanded change and questioned Del Frisco’s managerial decisions and recent sales & purchase transactions. Now, the firm has agreed to vote in favor of the L Catterton acquisition of Del Frisco’s. Engaged Capital had said Del Frisco’s was underperforming. Additionally, the firm said the sale of Sullivan’s Steakhouse to Romano’s Macaroni Grill in 2018 and the acquisition of Barteca Restaurant Group that same year were poor decisions that undervalued the transactions.

[Related article: Del Frisco’s enters into a cooperation agreement with Engaged Capital]

Former Barteca brands set for high-growth future

Also, a report over the weekend had suggested the companies were nearing finalizing the acquisition of Del Frisco’s. In the article, Restaurant Business had suggested Barcelona Wine Bar and Bartaco would be run in the high-growth restaurant group of L Catterton, which includes Uncle Julio’s. It noted the polished, casual-dining Mexican chain had sales growth of 14 percent in 2018. Uncle Julio’s tallied system-wide sales to $214.5M and unit count to 35.

Additionally, as part of its own review, Engaged Capital identified Bartaco and Barcelona Wine Bar as high-growth restaurant brands that would be stifled by Del Frisco’s ownership. Consequently, upon completion of the acquisition of Del Frisco’s, L Catterton has indicated these brands will be run separately from the steakhouse brands.

“L Catterton brings a distinguished track record of fostering the growth and success of world class experiential brands,” said Norman Abdallah, DFRG chief executive. “Together with their deep operational expertise in the restaurant industry, I am confident L Catterton will be a great long-term partner.” L Catterton restaurant portfolio also lists Hopdoddy Burger, Piada Italian Street Food and Velvet Taco. The firm also invested in prepared meals-provider Snap Kitchen.

Piper Jaffray & Co. advised Del Frisco’s and its Board on financial matters and Kirkland & Ellis LLP acted as legal counsel. Credit Suisse served as financial advisor to L Catterton and Gibson Dunn LLP was legal advisor.

Del Frisco’s acquisition summary

Photo credit: Del Frisco’s Restaurant Group

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