The move comes almost two years after the fine-dining company began exploring strategic alternatives.
SPB Hospitality, the parent of Logan’s Roadhouse and Old Chicago, announced Friday that it will spend $220 million to acquire J. Alexander’s Holdings.
The company is buying the fine-dining brand at $14 per share, which is a 14 percent premium over its closing price on July 1. The transaction is expected to close early in Q4.
J. Alexander’s Holdings operates 47 upscale restaurants across five concepts, including J. Alexander’s, Stoney River Steakhouse and Grill, Redlands Grill, Overland Park Grill and Merus Grill. The company will join a SPB Hospitality portfolio that also features Rock Bottom Restaurant & Brewery, Gordon Biersch Brewery Restaurant, Big River Grille & Brewing, Ragtime Tavern, Seven Bridges Grille & Brewery, and more.
“We are honored to acquire these storied brands and look forward to welcoming this experienced team into the SPB family,” said SPB CEO Jim Mazany in a statement. “This acquisition advances our vision to become the industry leader and a pioneer of hospitality, while developing our portfolio of brands and delivering best-in-class returns, one great restaurant at a time.”
J. Alexander’s will go private after nearly six years on the stock market. The company indicated as early as the summer of 2019 that it was seeking strategic alternatives. At the time, the chain mentioned multiple pathways, including a merger or sale, a strategic investment accompanied by a significant share repurchase, or the acquisition of complementary concepts to increase the revenue base and operating leverage. The brand retained investment banking firm Piper Sandler to facilitate the review.
Several months later, J. Alexander’s said its board believed its small size makes for an inefficient standalone publicly traded company. Piper Sandler contacted more than 125 potential buyers, and three emerged as serious candidates. One of the potential buyers offered “a premium to the then-current market price,” but that changed once the COVID pandemic hit. The company reduced the proposed purchase price multiple times and insisted on conditions relating to J. Alexander’s performance. As a result, J. Alexander’s shelved talks and chose to instead focus on rebuilding sales.
In April, sales lifted 5 percent compared to 2019, the first time the company has seen growth since the pandemic began. At J. Alexander’s and Redland Grill, average weekly same-store sales per restaurant in Q1 grew 3.1 percent year-over-year to $106,600, and at Stoney River Steakhouse and Grill, average weekly same-store sales lifted 4 percent year-over-year to $75,300. Off-premises remains strong, as well. The channel represented roughly 16 percent of total net sales in Q1, or $720,000 in average weekly off-premises sales. That’s only $10,000 fewer than what J. Alexander’s saw in Q4 2020.
The multi-million transaction is quite the turnaround for SPB Hospitality, as well. In the spring of 2020, CraftWorks, the former parent of Logan’s and the other brands, filed bankruptcy after closing 37 underperforming stores. COVID forced the company to close all 261 of its corporate stores and terminate a majority of its 18,00 employees. Fewer than 25 workers remained to preserve the brand.
In May, a bankruptcy court approved a $93 million credit bid by senior lender Fortress Investment Group. The deal was $45 million less than Fortress’s original offer. The judge described it as the “best available option” to avoid a possible Chapter 7 bankruptcy and permanent shutdown. As a result of the transaction, SPB was formed to take over and turn around the restaurants.
“We have enormous confidence in SPB leadership and their vision for building a true industry leader in the hospitality space,” said Morgan McClure, president of SPB and managing director of Fortress, said in a statement. “J. Alexander’s exceptional team and established brands mark an important addition to the SPB family and a significant step forward in achieving SPB’s vision.”
J.P. Morgan Securities LLC and Configure Partners LLC served as financial advisors and Hunton Andrews Kurth LLP served as legal counsel to SPB Hospitality and Fortress Investment Group. Piper Sandler & Co. served as financial advisor to J. Alexander’s Holdings Inc. and Bass, Berry & Sims PLC acted as the company’s legal counsel.