LV restaurant operator Il Fornaio sold to investment firm

Friday, Nov. 17, 2000 | 11:17 a.m.

SUN STAFF AND WIRE REPORTS

Il Fornaio (America) Corp., which runs 24 upscale Italian restaurants in seven states including Nevada, said Thursday it agreed to be purchased for $14 per share, or about $81 million, by the private investment firm Bruckmann, Rosser, Sherrill & Co. of Greenwich, Conn.

The Corte Madera, Calif.-based restaurant chain opened a Las Vegas restaurant at the New York-New York hotel-casino in 1997 and a second Las Vegas eatery called Caneletto at the Venetian hotel-casino in 1998.

Il Fornaio plans to open a third Las Vegas-area restaurant at the Green Valley Ranch hotel-casino under construction in Henderson. The hotel-casino, due to open in 2001, is being built by Station Casinos Inc. and the Greenspun family's American Nevada Corp. The Greenspun family also owns the Las Vegas Sun.

"This will be our first non-Strip restaurant for residents in Las Vegas and it'll be named Il Fornaio," which means the baker in Italian, said Michael Mindel, Il Fornaio's spokesman. "We named our second restaurant Caneletto because we didn't want to have two identical restaurants next to each other."

Thursday's sale came after investors lost confidence in the company due to extremely wide earnings swings and missed-profit estimates, said Michael Smith, a restaurant analyst with Fahnestock & Co.

Il Fornaio's shares have traded as low as $4.50 and as high as $17 since it went public in September 1997 at $9 per share.

Early in 1999, Il Fornaio said it was evaluating its "strategic alternatives," including a possible sale or management-led buyout.

Thursday's deal, which is subject to shareholder approval, is scheduled to close in the first half of 2001. No major changes are expected in management or operations, Mindel said.

Il Fornaio executives will cash out part of their holdings but retain large equity stakes in the chain. Last year, the chain chalked up sales of $100.4 million.

Smith said he had recently upgraded his stock recommendation on Il Fornaio to a strong buy. After a string of earnings disappointments, the company showed improvement in the second and third quarters of this year, he noted.

"If they could have executed (properly), right now the stock could have been 22 bucks" based on its sales growth and earnings potential, Smith said. "It was just going to take a little time to regain the market's confidence."

Mindel declined to comment on speculation that Il Fornaio might go public again in a few years, when it is larger and more stable.

But Smith said that is a possible outcome. Currently, just one problematic location among Il Fornaio's 24 restaurants and three wholesale bakeries can dent earnings companywide, he said.

Bruckmann has been known to take its investments public, including the popular California Pizza Kitchen earlier this year. Bruckmann bought that company from PepsiCo. in 1997 and remains a controlling shareholder.

Shares of Il Fornaio rose 36 percent Thursday to $12.69.