Rubio's to be acquired for $91 million
The sale is expected to take effect during the company's third 2010 quarter.
May 9, 2010 by Valerie Killifer — senior editor, NetWorld Alliance
Rubio's, The company that ended its first 2010 quarter with no debt and $8.3 million in cash, is being sold for $91 million.
Carlsbad, Calif.-based Rubio's Fresh Mexican Grill has agreed to be acquired by Greenwich, Conn.-based private-equity firm Mill Road Capital LP for $8.70 per share. The buyout was for about 14 percent more than what the company's stock price was per share at the time of the agreement: Rubio's Friday closing price of $7.66 per share. As of Monday afternoon, Rubio's shares had increased to $8.50.
Dan Pittard reviewed the merger agreement in a company conference call May 10. Pittard said the agreement was unanimously approved by both a special board of directors committee and the company's board of directors, but the merger is subject to stockholder and regulatory approvals, and is expected to close during the third quarter of 2010.
Pittard said he, along with company founder and chairman Ralph Rubio and private equity firm Rosewood Capital, collectively own about 24 percent of the company's outstanding shares, and have committed to vote in favor of the deal.
Pittard said after the merger's completion he will remain in his role as president, CEO and board member. Ralph also will remain on the board and will continue to focus on Rubio's food and beverage platform in addition to being the company's main spokesman.
"Mill Road's desire to add Rubio's to its portfolio underscores our strategy within fast casual, which continues to be the fastest growing segment of the restaurant industry," Pittard said. "Mill Road expands our fincial resources in terms of both financial strength and industry knowledge. I am confident that this combination will create opportunities for our employees and position us well for the future."
Nearly eight months ago, Rubio's and its board of directors rejected an $80 million buyout offerfrom stockholder Alex Meruelo and the Meruelo Group, and Levine Leichtman Capital Partners IV LP, to acquire all of the company's outstanding common stock for $8 per share.
Meruelo controls 11.6 percent of Rubio's outstanding shares, according to a filing with the U.S. Securities and Exchange Commission in April.
Pittard said at the time the company did not believe the offer was in Rubio's best interest.
The announcement also comes at the same as Rubio's release of its first quarter 2010 earnings.
Comparable store sales decreased 1.8 percent in the first quarter versus a comparable store sales increase of 1.9 percent in the same quarter last year. In the first quarter of 2010, the impact of decreased transaction volume more than offset an increase in the average check per customer, according the the company's earnings report.
Meanwhile, revenues for the quarter totaled $46.7 million, an increase of 1 percent from $46.3 million reported in the same year-ago quarter.
Net income was $367,000, or $0.04 per basic and diluted share, versus a net income of $245,000, or $0.02 per basic and diluted share, reported in the same year-ago quarter.
Cash and cash equivalents as of March 28, 2010, totaled $8.3 million, down 13 percent from $9.5 million at the end of 2009.
Average unit volume was slightly less than $1.0 million, which was virtually unchanged from the same year-ago quarter.
Restaurant operating margin also was 16.6 percent, as compared to 15.7 percent in the same year-ago quarter.
"Improved restaurant operating margins of 16.6% resulted in record adjusted EBITDA for a first quarter and drove net income growth of 50 percent," Pittard said. "This was achieved despite comparable store sales negatively impacted by periods of above average rainfall, in addition to the ongoing unemployment challenges in the markets we serve."
Rubio's opened three restaurants in the first quarter of 2010, as compared to four in the same period in 2009. Rubio's operates more than 195 restaurants in California, Arizona, Colorado, Utah and Nevada.
