Second Rainforest Cafe merger fails

Friday, April 28, 2000 | 11:17 a.m.

Landry's Seafood Restaurant Inc.'s bid to acquire the company that operates the Rainforest Cafe franchise is dead.

The two companies announced this week that a $125 million merger agreement announced in early February is off and a special Rainforest Cafe Inc. shareholders meeting scheduled today was canceled. Houston-based Landry's had offered $5.23 a share in the deal.

The failed merger is the second time in four months that deals to acquire Rainforest have collapsed. Late last year, Lakes Gaming Inc., Minnetonka, Minn., offered $4.33 a share for the company.

Lyle Berman, whose former company, Grand Casinos Inc., owned the Stratosphere Tower hotel-casino in Las Vegas, is chief executive officer of both Rainforest and Lakes Gaming.

Tilman Fertitta, chairman, president and chief executive officer of Landry's, said he was disappointed that the deal didn't go through.

"Obviously, some of Rainforest's shareholders believed we cut too good a deal for Landry's shareholders," Fertitta said in a statement. "We cannot be faulted for that. We are a disciplined buyer and we're not willing to increase our offer."

Landry's operates three restaurants in Las Vegas and will open a fourth within weeks. The company, which has 150 properties in 26 states, owns the Landry's Seafood House, 2610 W. Sahara Ave., and the Joe's Crab Shack franchise, which has two Las Vegas-area locations with a third opening at Sahara and Fort Apache Road next month.

The company is the No. 2 casual seafood dining chain in the United States behind Darden Restaurants' Red Lobster properties. The company offers entrees in the $11 to $13 range.

Rainforest has 28 domestic locations, including a flagship operation at the Mall of America in Minneapolis, and 11 international units.

Rainforest has one location in Las Vegas at the MGM Grand hotel-casino. The jungle-themed restaurant accompanies a retail outlet that sells shirts, hats and jungle animal-centered souvenirs.

The Rainforest leases the 25,000 square feet the restaurant and store occupy at the MGM Grand.

Phil Froehlich, the Las Vegas-based managing vice president of the local property who also oversees operations in other western states, said the potential merger with Landry's was not a particularly hot topic among his employees.

"You're always a little concerned about change, but hopefully, it's change for the best," Froehlich said. "It's like how Mirage employees are concerned about what changes are ahead for them."

MGM Grand Inc. is acquiring Mirage Resorts Inc. for $6.7 billion.

The potential for new ownership allows the company to refocus on its product, Froehlich said, and that can make a property stronger.

"As one of the leading themed restaurants in the nation, we're always interested in knowing about other companies that are looking at us," he said.

But there apparently are no new deals on the table.

The St. Paul Pioneer Press reported that Rainforest President Kenneth Brimmer said that "the focus here will be 100 percent on running the business," and that Rainforest will not court another buyer.

Two major institutional investors in Rainforest were working to block the Landry's deal, the newspaper said.

The State of Wisconsin Investment Board contacted two Rainforest directors about discussing a management shakeup and Heartland Funds, Milwaukee, filed a lawsuit to block the Landry's deal.

Both felt the two bids for the company were too low.

The company's stock price has slid from $25 a share in 1997 to a low of $2.13 a share in December. Today, Rainforest was trading at $3.19 a share, unchanged from Thursday's closing price.