Texan Buying Morton’s Steakhouse Chain

January 19, 2012

Texans Buying

Texan buying Morton's steakhouse chain

Executives have met at Morton's steakhouses for more than three decades, talking shop and making deals. Now the storied Chicago chain is making a deal of its own, selling itself to Texas restaurateur and Landry's Inc. Chief Executive Tilman Fertitta.

Fertitta's acquisition of Morton's Restaurant Group Inc., announced Friday, values the high-end steakhouse chain at about $116.6 million. Houston-based Fertitta is offering $6.90 per share in cash for Morton's, a 33.7 percent premium over the company's Thursday closing price of $5.16. The deal is expected to close in early February 2012.

Morton's had said in March it was considering a sale of the company and had the blessing of Castle Harlan Inc. and Laurel Crown Partners LLC, its largest shareholders. Fertitta already owns 5 percent of Morton's. The industry veteran, whose holdings at Landry's include Rainforest Cafe and Claim Jumper, described himself as a longtime admirer of the Chicago steakhouse.

"Morton's is the largest, most iconic high-end restaurant chain in America and I've always thought a lot of it," Fertitta told the Tribune in an interview. "They have excellent food and great service."

Morton's has 77 steakhouses in 64 cities worldwide; it also operates Trevi, an Italian restaurant at Caesars Palace in Las Vegas. While the recession caused revenues to fall almost 15 percent to $281.1 million in 2009, the company rebounded last year with the help of an expanded bar menu offering lower-price items. When Morton's reported third-quarter earnings in October, it projected full-year 2011 revenues of $321 million to $323 million.

Fertitta said he plans to retain much of Morton's management, which he praised for having "grown the company in tough times over the last couple of years."

In a statement, Morton's Chief Executive Christopher Artinian said "Tilman has an outstanding portfolio of restaurants. He really understands the value of the Morton's brand and our people, and is well-positioned to further enhance our reputation as the world's best steakhouse."

Morton's declined to comment further.

Fertitta said he plans to add "a few lower price-point items" to the Morton's menu while keeping all of its core offerings. He will also freshen the chain's decor and "give it a more contemporary look" in line with the taste of modern diners. Fertitta said these tweaks would be "nice, subtle changes," emphasizing that Morton's will remain aimed at high-end clientele.

"We like the business traveler, the tourist, the local patron and we like the brand," he said.

As for adding locations, Fertitta said, "we can see Morton's definitely expanding."

The Morton's deal is Fertitta's second announced acquisition in as many months. He is in the process of buying seafood chain McCormick & Schmick's. He also is ramping up activity in hospitality and gaming, buying the Trump Marina Hotel and Casino in Atlantic City, N.J., and turning it into a Golden Nugget. Landry's is the parent company of the Golden Nugget properties in Las Vegas and Laughlin, Nev.

Fertitta's companies are expected to generate about $2 billion in revenue this year, according to Landry's.

"When you look at Landry's or Tilman, the way they purchase brands is they don't tend to grow the brands," said Darren Tristano, executive vice president of Chicago-based food industry consultant Technomic. "They look for strong brands they can modernize, contemporize — even remodel — and raise their operating margins. I haven't really seen very many of the brands add units after they've been acquired."

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