HOUSTON CHORONICLE, Business Section - October 11, 2006
Landry’s lets go of Joe’s
By David Kaplan
Moving upscale, Landry’s is unloading its Shacks.
Houston-based Landry’s Restaurants has agreed to sell most units of Joe’s Crab Shack to private equity firm J.H. Whitney Capital Partners for $192 million, a price that was less than expected by at least one analyst.
Selling 120 of the 143 Joe’s Crab Shacks will allow the company to focus more on higher-end restaurants, gaming, entertainment and hospitality, Landry’s Chairman Tilman Fertitta said Tuesday.
Although the company showed a 1 percent increase in same-store sales for the third quarter, Joe’s posed an 8 percent decline in sales. Nevertheless, news of the sale caused shares of Landry’s to fall 10.4 percent.
The remaining 23 Joe’s will either be converted to another Landry’s concept, closed and sold, or run under a license agreement with JCS holdings, a group formed by J.H. Whitney Capital to acquire Joe’s.
Fertitta said some of the 23 will be converted into Saltgrass Steak Houses.
Landry’s is getting rid of most of its Joe’s, because “we’re just more focused on higher-end, higher volume-driven” products, Fertitta said.
Joe’s Crab Shack has almost 150 stores, “but they’re only 20 percent of our revenue,” Fertitta noted.
All Houston-area Joe’s are strong performers and will remain Joe’s Crab Shacks, Fertitta said.
“We think it was wise of Landry’s to dispose of a more standard, nonspecialty group to focus more on one-of-a-kind enterprises, higher-end specialty restaurants and major high-tech facilities,” said Paul Westra, a research analyst with Cowen and Co.
“It’s a win-win strategy” for both Landry’s and Joe’s, Westra said, because it allows Landry’s to concentrate on its upscale ventures and enables Joe’s to get a makeover.
“Joe’s is in a turnaround mode,” Westra said, and a private-sector group is better positioned to invest in remodeling, whereas public companies are highly concerned with quarter-to-quarter profits.
New Canaan, Conn.-based J.H. Whitney Capital Partners is a private equity fund invested in specialty retail, health care services, specialty manufacturing and business services.
The group was founded in 1946 by industrialist John Hay Whitney.
Officials with J.H. Whitney Capital Partners were not available for comment.
Landry’s still owns many restaurant chains, including Landry’s Seafood House, Saltgrass Steak House, Rainforest Cafe, Chart House, Cadillac Bar, Willie G’s, Grotto and Crab House.
In Houston, Landry’s also owns Vic & Anthony’s Steakhouse, Pesce and La Griglia.
Landry’s also owns the Golden Nugget Casinos, Kemah Boardwalk, The Aquarium, Inn at the Ballpark, San Luis Hotel & Resort, Hilton Galveston and other hotels.