Fat Brands to merge with majority shareholder Fog Cutter Capital Group

Merger frees up parent of Fatburger to more easily grow through acquisitions

Fat Brands, the parent of Fatburger, Johnny Rockets and several other fast-casual brands, has agreed to merge with its majority shareholder, Fog Cutter Capital Group (FCCG). The merger will remove the need for FCCG to hold an over-80-percent share of Fat Brands stock for the restaurant company to utilize its $100M of net opening loss carry-forwards (NOLs). The move also increases Fat Brands’ financial flexibility and will better-position it for future acquisitions, according to an announcement.

Merger details

FCCG currently owns 81.6 percent of the common stock. FCCG will merge into a subsidiary of Fat Brands, which becomes the surviving parent company. No listing change of Fat Brands (Nasdaq: FAT) stock will occur as a result of the transaction.


In addition, FAT common stockholder will receive a $5.80 liquidation preference per common share in unrestricted FAT 8.25-percent Series B Cumulative Preferred Stock with any partial shares will be redeemed for cash. The record date of the transaction will be December 21, 2020 and an expected payment date of December 23, 2020.

FCCG shareholders will receive the same amount of restricted FAT stock as they held of FCCG.

FAT common stock surged to $10.67 per share for a 23.7-percent gain in morning trading after the merger announcement.

Fat Brands-FCCG merger rationale

“As we have disclosed in the past, FAT Brands has considered a combination with Fog Cutter as another step in our efforts to simplify our corporate structure and eliminate limitations that restrict our ability to use common stock for accretive acquisitions and capital raising,” said Andy Wiederhorn, president and chief executive of Fat Brands. “…With this combination, the NOLs will be internalized at Fat Brands, and we will now have much greater flexibility and optionality in our capital structure.”


The transaction will also remove inter-company debt between Fat Brands and FCCG. The simplified capital structure will help Fat Brands acquisition-heavy strategy to move forward with ease. Plus, the move will increase the amount of stock that investors will be able to trade to 46 percent

Fat Brands has made no secret of its acquisition strategy: With an improved ability to fund purchases through common stock issuance, executives are sure to take advantage of unique opportunities caused by COVID-19’s adverse impact on smaller restaurant groups and chains. There’s no doubt that Fat Brands management is already planning its next purchase, although this was not disclosed.

Moreover, the company will be able to issue additional stock as needed, tapping equity markets in a way that it had not done so before.


After the Johnny Rockets acquisition, Fat Brands projected doubling its EBITDA of $7.7M. It reaffirmed the estimate although it’s now qualified based on a post-COVID-19 environment.

Fat Brands’ acquisition of Johnny Rockets follows the purchase of Elevation Burger in 2019 and the acquisition of Yalla Mediterranean at the end of 2018. Fat Brands also acquired Hurricane Grill & Wings in 2018. Previously, Fat Brands had purchased the Bonanza and Ponderosa chains in 2017.

Fat Brands is the parent and franchisor of Buffalo’s Cafe, Buffalo’s Express, Elevation Burger, Fatburger, Hurricane Grill & Wings, the Ponderosa and Bonanza Steakhouses, and Yalla Mediterranean.

Photo credit: Fat Brands (featured preview image)

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