Red Robin Gourmet Burgers, Inc. (Nasdaq: RRGB), aannounced that it has closed on the acquisition of 15 of the 17 existing franchised Red Robin® restaurants in the state of California from Top Robin Ventures and Morite of California effective June 18, 2007. In addition, the franchise territory included in this acquisition encompasses the area of Los Angeles County north of Interstate 10, the California counties of San Luis Obispo, Santa Barbara, Ventura, Fresno, Kings, Tulare and Kern, as well as a portion of Riverside County. The purchase price paid for the initial 15 restaurants was approximately $41.9 million, plus $320,000 for the acquisition of working capital. The purchase price was paid in cash, funded through borrowings under the Company’s new $300 million amended credit facility.
The Company also assumed management of the remaining two restaurant locations owned by Top Robin Ventures under management services agreements. The Company expects to close on the remaining two restaurants assuming finalization of acceptable real estate lease terms and liquor license transfers. The Company also intends to acquire an additional restaurant currently under construction in Fresno, California upon its opening, which is expected to occur in July 2007. The consideration expected to be paid for the 18th restaurant (which will be equal to Top Robin’s construction and related costs) will be in addition to the $47.5 million expected to be paid for all the 17 existing restaurants.
The asset purchase agreement provides for up to an additional $3 million purchase price earn-out to be paid to the sellers assuming all eighteen of the acquired restaurants achieve certain 2007 sales targets. For the first quarter 2007, a portion of the targeted sales for the acquired restaurants has already been achieved, and approximately $870,000 of the total earn-out was paid at the first closing. The remaining earn-out amounts are scheduled to be paid in quarterly installments based on actual sales through the rest of fiscal year 2007. As previously disclosed, the 17 formerly franchised restaurants generated $56.3 million in revenue in 2006.
“We are pleased to welcome the outstanding team members of Top Robin Ventures to the Red Robin family and look forward to their continued operational success and seamless integration into the Company. In addition to the acquisition of these restaurants, we have acquired significant territory in this established market which we are currently evaluating for additional restaurant development opportunities. Finally, our new credit facility offers us expanded access to capital, more preferable terms, and allows greater flexibility in the uses of those funds,” said Dennis B. Mullen, chairman and chief executive officer.