Morton’s Restaurant Falters As the Economy Slows

Morton’s Restaurant Group, having fended off a hostile bid in May, is shopping itself around, but public-company buyers may take a pass on the restaurant operator. “A financial buyer would make more sense than a strategic acquirer,” says Mark Sheridan, a restaurant stock analyst at Johnson Rice & Co. The hostile bidder, BFMA Holding Corp., put three directors into contention for board seats at Morton’s annual meeting in May. They attempted to oust Morton’s current CEO, Alan Bernstein, and CFO, Thomas Baldwin, in the bid, but the dissident slate was defeated. BFMA is the Pompano Beach, Fla.-based investment vehicle of financier Barry Florescue. On May 1, BFMA issued a takeover offer of $118 million, or $28.25 a share, for Morton’s. BFMA is backed in part by corporate raider Carl Icahn. Florescue’s company held a 9.3% stake in Morton’s at the time of the election. In the wake of the defeat of BFMA’s bid, Baldwin said “the company will evaluate a full range of strategic options, including a potential sale of the company.” Morton’s retained investment bank Greenhill & Co. prior to the annual meeting. A spokesman for BFMA said it has contacted Greenhill since its slate of board members was defeated in an effort to start direct negotiations that could lead to a sale. Hyde Park, New York-based Morton’s operates two restaurant chains: its flagship Morton’s of Chicago steakhouse chain, which includes about 60 restaurants, and Bertolini’s Authentic Trattorias, with five outlets. Sheridan says that the slowing economy has undercut the entertainment spending of the high-end business clientele in which Morton’s specializes. “They do a lot of corporate meetings, banquets, and presentation business, but that sector has softened considerably,” he notes. He says that one company sometimes touted as a potential acquirer of Morton’s, Outback Corp., is unlikely to bid on the assets. Despite its well-established operations, he says, Morton’s growth rate would not be attractive to a public company. He adds that Morton’s has gone through a series of write-offs and carries a sizeable amount of debt on its books.