Redrock Partners LLC is buying struggling Romano's Macaroni Grill from Ignite Restaurant Group Inc. (Nasdaq: IRG) for $8 million in cash.
Romano's is a fast-casual Italian restaurant chain that was founded in 1988 and is headquartered in Houston. The chain currently operates 146 locations in 33 states, and franchises 25 locations in the U.S. and in eight other countries. The deal is expected to close within the next 30 days.
"We continue to believe in the underlying strengths of the Macaroni Grill business. Unfortunately, the brand was unable to deliver, in a timely manner, on the milestones we established. As a result, we decided that it was in the best interest of Ignite and our shareholders to sell the brand," says Ray Blanchette, CEO of Ignite.
Phoenix-based RedRock will promote current president John Gilbert to CEO; Dean Riesen as chairman; and investor Dick Monfort. Gilbert's track record includes developing the "America Runs on Dunkin'" campaign and the Jack Daniel's Grill at TGI Fridays. Riesen has worked mainly in the hospitality industry, including as the CFO of Carlson Holdings Inc. Monfort is the majority owner of the Colorado Rockies Major League Baseball team. He's also the CEO of Monfort Meats and president of ConAgra Foods Inc.'s (NYSE: CAG) protein division.
Ignite, headquartered in Houston, also owns Joe's Crab Shack and Brick House Tavern & Tap. The company acquired Roman's in April 2013. Ignite will announce its fourth quarter results on March 12.
Ignite closed 12 of the restaurant's locations in 2014, as of Oct. 30, according to a filing with the U.S. Securities and Exchange Commission. For the thirteen weeks ended Sept. 29, Romano's had a $7.8 million loss from operations, though that number includes the cost of the store closings. SEC filings show that Brick House experienced a loss of $54,000.
That loss is less than the $10.2 million loss Romano's experienced during the same period in 2013. The company had faced revenue declines when Ignite bought it, according to SEC filings.
There have been a few other restaurant transactions recently. In November, Romulus Inc. agreed to buy 16 IHOP (International House of Pancakes) franchises. In October, Apollo Global Management's (NYSE: APO) Chuck E. Cheese bought Peter Piper Pizza. For more, see Finance Finesse: Debt Markets Nourish Restaurant M&A.