Bravo Brio Restaurant Group rejected an acquisition proposal from Romano’s Macaroni Grill, the company announced May 15. The “unsolicited proposal” arrived May 9 and offered to purchase all of the fully diluted outstanding common shares for about $4.79 per share.
Bravo Brio’s board of directors reaffirmed its recommendation to shareholders to approve the previously announced transaction with Spice Private Equity Ltd. The Switzerland-based company, which is an affiliate of GP Investments, agreed to purchase BRAVO! Cucina Italian and BRIO Tuscan Grille’s parent company for about $100 million, or $4.05 per share in cash. While Romano’s offer is 18 percent higher, Bravo Brio said there are additional factors that make the original deal, first announced March 7, more appealing.
The company said Romano’s proposal relies on significant third-party financing, both debt and equity, including by Raven Capital Management LLC. Raven was a prior participant in Bravo Brio’s “comprehensive review of strategic alternatives” that led to the company’s entry into a definitive merger agreement with an affiliate of Spice.
“BBRG’s board of directors thoroughly evaluated Macaroni Grill’s proposal, including seeking clarifications from Macaroni Grill on the terms and conditions of its proposal and consulting with BBRG’s financial adviser and outside legal counsel,” the company said. “Following that evaluation, BBRG’s board unanimously determined that the proposal did not constitute and would not reasonably be expected to result in a ‘Superior Proposal,’ as defined in the Spice Merger Agreement and, accordingly, rejected the Macaroni Grill proposal.”
Romano’s said in the proposal that it would rely upon fully committed financing from third-party equity and debt sources to finance the transaction, as opposed to its own cash on hand or immediately available borrowing capacity. Representatives from the chain also said the deal would be subject to an additional regulatory condition relating to the receipt of approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which such condition is not applicable to the transactions contemplated by the Spice Merger Agreement.
Romano’s emerged from Chapter 11 bankruptcy protection in late February. It filed for bankruptcy on October 18, 2017. To get out, Romano’s successfully renegotiated lease terms, vendor contracts, and secured $13.5 million in new capital to fund restructuring efforts and invest directly in the company.
Bravo Brio said it requested commitment papers and other documentation supporting Romano’s financing plans in regards to a possible acquisition. A day later, Bravo Brio requested clarification of terms and conditions of the proposal.
“In response to that request, Macaroni Grill delivered highly-conditional and non-binding letters of financing support which were not enforceable by the company,” Bravo Brio said. “… Macaroni Grill also failed to provide the company with a proposed revised merger agreement that it would be prepared to execute to effect a transaction. The board has provided Macaroni Grill with ample time and opportunity to produce an actionable proposal with fully-committed financing, and Macaroni Grill has failed to do so.”
Bravo Brio is holding a special meeting of shareholders on May 22 to approve the transaction with Spice. The company owns and operates 110 locations in 32 states, and reported sales of about $400 million in 2017. Romano’s had 86 company-owned locations in 22 states, plus 21 franchise locations in the U.S. and seven other countries, when it emerged from bankruptcy.