Landry’s tries again to acquire Rainforest Cafe

Karren Mills

Wednesday, Sept. 27, 2000 | 10:40 a.m.

MINNEAPOLIS -- Landry's Seafood Restaurants, which had a $125 million offer for Rainforest Cafe spurned by shareholders just five months ago, said Tuesday it now has agreed to buy the company for $75 million in cash.

But don't expect the sale to go through without a fight, said John Nelson, investment director of small company stocks for the State of Wisconsin Investment Board, a big Rainforest shareholder.

The board, which invests pension money for the public employees and retirees of the state of Wisconsin and owns more than 13 percent of Rainforest's stock, blocked Landry's previous attempt to acquire Rainforest because the offer was too low. The newest offer is lower in part due to Rainforest's poor performance in the past few months.

"I am furious. I can't believe they're doing this again," Nelson said. "We plan to oppose the merger. We think the price being offered is an outrage to shareholders."

Under the new agreement, Houston-based Landry's, which already owns 4.5 percent of Rainforest, agreed to pay $3.25 a share for all outstanding Rainforest shares, if a majority of Rainforest's 22.8 million shares are offered for purchase.

The deal, which has been approved by the boards of both Rainforest and Landry's but requires approval by regulators, does not prohibit Rainforest from accepting a higher offer.

Robert Hahn, Rainforest chief financial officer, puts the chances of passage at "better than 50-50" and expects the necessary shares to be tendered in 30 to 40 days.

Rainforest shares rose 49 percent, or $1, at $3.03 in afternoon trading Tuesday on the Nasdaq Stock Market. Landry's shares were down 6.25 cents at $7 on the New York Stock Exchange.

Rainforest Cafe, based in Hopkins, Minn., operates or licenses 29 theme-based restaurant/retail facilities and 12 international restaurants. The company recently announced that it would be closing its businesses in Westbury, N.Y., and Manchester, England, in October.

Landry's, the nation's second-largest seafood chain, operates casual-dining seafood restaurants, including Joe's Crab Shack, Landry's Seafood House and the Crab House.

Landry's had agreed in February to buy Rainforest for $5.23 a share, but that stock-and-cash deal was rejected by Rainforest shareholders after the Wisconsin Investment Board urged shareholders to vote against the deal.

Just before that deal was rejected, Rainforest's stock was trading at $3.75. The stock has been sliding or flat for much of the time since then.

U.S. Bancorp Piper Jaffray said the new tender offer price of $3.25 was fair to Rainforest stockholders.

Nelson disagreed. "They expect shareholders to go along with it because it's a premium off of a lower stock price," he said.

For the second quarter ended July 2, sales at Rainforest stores open at least 18 months were down nearly 13 percent, or $6.4 million, from a year earlier, Rainforest reported in August. Performance by the company's mall stores was even worse, down 19 percent.

Due to the continued decline in performance by its mall stores, Rainforest said in a filing with the Securities and Exchange Commission that it no longer planned to expand in shopping malls and that all future expansion would be at tourist locations.

The Wisconsin Investment Board still was determining what course it would take in fighting the latest acquisition bid, Nelson said. Among the options were soliciting shareholders or going to court to have a judge determine the fair value of the company.

If the court determines the company's value is above what is being offered, under Minnesota law the acquiring company must pay shareholders the value determined by the court, Nelson said.