Pancho’s Mexican Buffet, Inc.
(Nasdaq: PAMX) has signed a definitive agreement
to merge with Pancho’s Restaurants, Inc., an affiliate of Stephen Oyster of Austin
Pursuant to the merger agreement, each share of Pancho’s common stock will be
converted into the right to receive $4.60 cash per share. Pancho’s currently has
approximately 1.5 million shares outstanding, and outstanding options to purchase
approximately 175,000 shares.
Pancho’s Board of Directors has unanimously approved the merger. Wells Fargo
Van Kasper is serving as financial advisor to the Company.
Consummation of the merger is subject to certain closing conditions, including the
acquiring company’s obtaining a commitment letter from its lender, pursuant to
which its lender commits, subject to the terms and conditions contained in the
commitment letter, to provide an aggregate of up to $6 million in cash as a senior
secured credit facility. The terms of the senior secured credit facility must be
reasonably satisfactory to the Company. In addition, the acquiring company must
have entered into a commitment letter with Mr. Oyster, pursuant to which Mr. Oyster
commits to provide an amount equal to the aggregate amount of the merger
consideration and all other fees and expenses required to be paid by the acquiring
company in connection with the transactions contemplated by Merger Agreement,
less the amount committed by the lender. The aggregate cash amount to be
provided under these commitment letters must be sufficient to pay the aggregate
merger consideration and to make all other necessary payments of fees and
expenses of the acquiring company in connection with the merger.
Because the acquiring company has not received the commitment letters from its
lender or from Mr. Oyster, the transaction remains subject to review by the acquiring
company’s lenders and Mr. Oyster. Consequently, there can be no assurance that
the merger will occur or, if it occurs, that the price per share will be $4.60.
In addition, the Company may terminate the Merger Agreement if the Company has
not received the written opinion of Wells Fargo Van Kasper on or before May 18, 2001, or such other date as the
parties may agree upon, to the effect that the merger consideration is fair to the Company’s stockholders from a
financial point of view.
The acquiring company may terminate the Merger Agreement if, (i) the working capital of the Company as of the
end of the calendar month immediately prior to the filing of the Company’s definitive proxy statement with the
Securities and Exchange Commission in connection with the meeting of stockholders to be held to consider the
approval of the Merger Agreement, including all expenses of the Company in connection with the transactions
contemplated by the Merger Agreement, is less than — (negative) $3,880,000; or (ii) aggregate same-store sales
for the period from the beginning of fiscal year 2001 of the Company through the end of the calendar month
immediately prior to Filing Date compared with the aggregate same store sales for the corresponding period of the
preceding fiscal year has decreased by more than 10%; or (iii) prior to the filing of the definitive proxy statement,
the acquiring company is not able to obtain and deliver the commitment letter from its lender or lenders.
The merger is expected to be completed by the end of the second quarter of 2001, and is subject to approval by
the Company’s stockholders and certain other customary conditions. A special meeting of the Company’s
stockholders will be scheduled in connection with seeking the approval of the Company’s stockholders.
“The Merger Agreement is the culmination of the efforts of our in investment bankers, Wells Fargo Van Kasper,
working closely with our Board of Directors to find strategic financial alternatives for the Company to maximize
stockholder value,” said Hollis Taylor, President and Chief Executive Officer of the Company. “The Company’s
Board of Directors concluded that the cash transaction with Mr. Oyster’s affiliated companies offered the best
financial alternative for the Company’s stockholders.”
Stephen “Duffy” Oyster, President of Pancho’s Restaurant’s Inc. in commenting upon the approximately $7 million
agreement to acquire the Company, said “The $4.60 per share offer is an exceptional deal for the stockholders in
that it represents an 84% premium over Friday’s (March 30) closing price of $2.50 per share.” He further stated:
“The employees of Pancho’s are dedicated and committed individuals working in outdated facilities. The new
company plans to remodel most of the existing stores along with a strategic focus on superior food and service.”
Stephen Oyster is a former partner of Foodmaker, Inc., where he served as Executive Vice President, and
President of Foodmaker Realty Corp. He has been an investor in real estate and restaurants in Austin, Texas since
1988. Mr. Oyster expects American Commercial Capital LLC to provide approximately $6 million in connection with
the financing of the transaction and that his investment company will provide the balance of the purchase price, plus
working capital and remodeling funds.
Based in Fort Worth, Pancho’s Mexican Buffet, Inc. is the only publicly- held company offering all-you-can-eat
Mexican food in a buffet-style format. The Company operates 48 restaurants in Texas, Arizona, Louisiana, New
Mexico and Oklahoma.