Ignite Restaurant Group’s Acquisition Of Macaroni Grill: Assessing The Potential Risks And Rewards

On February 7th, Ignite Restaurant Group (IRGannounced it was acquiring Golden Gate Capital’s 80% interest in Romano’s Macaroni Grill (RMG) for $55 million. According to an article in Nation’s Restaurant News, Brinker International’s (EAT) 20% stake was also part of the transaction. In this article, I will analyze some of the risks and rewards of the acquisition for IRG shareholders.

Background

RMG is a 25-year-old restaurant chain with 210 units in 39 states. Brinker International acquired the chain in 1989. Golden Gate Capital acquired 80% of the chain from EAT in 2008. Golden Gate initially offered $131 million for its 80% stake, but that price was later reduced to $88 million as the financial crisis hit and financing became difficult and same-store sales declined. [Read more…]