PF Chang’s to go private in $1.1 billion deal with private equity firm

SCOTTSDALE, Ariz., Tue May 1, 2012 – P.F. Chang’s China Bistro Inc (PFCB.O), which has been fighting to recover from ill-timed price increases, said it would go private in a $1.1 billion deal with Centerbridge Partners, sending its shares up 30 percent.

Centerbridge, a private equity firm that owns restaurant holding company CraftWorks Restaurants & Breweries, will pay $51.50 per share for P.F. Chang’s, a premium of about 30 percent to the stock’s closing price on Monday.

The shares jumped $11.83 to $51.52 on the Nasdaq Tuesday morning. The stock, which had fallen about 20 percent over the year to Monday, last traded above $50 in February 2011.

“It looks like a fair price,” said Morningstar analyst R.J. Hottovy.

The deal comes in at about 8 times trailing earnings before interest, tax, depreciation and amortization (EBITDA), right where most deals in the last year have landed, including Golden Gate Capital’s acquisition of California Pizza Kitchen in July 2011, he said.

“If you find a company that’s been beaten up but there’s no structural damage to the company, this may be the time for a deal,” Hottovy said.

Shares in other full-service restaurants, including Cheesecake Factory Inc. and Buffalo Wild Wings Inc., moved higher on the P.F. Chang’s news.

In a week brimming with consumer sector news, Microsoft Corp. said it would invest $605 million over five years in Barnes & Noble Inc.’s Nook e-reader and college business; Collective Brands Inc., owner of the discount footwear chain Payless ShoeSource, signed a deal to be bought by shoemaker Wolverine Worldwide Inc. and two private equity firms for $1.32 billion; and DineEquity Inc. found a buyer for 39 of its Applebee’s restaurants in Virginia.

P.F. Chang’s CEO Rick Federico said going private would give his company greater flexibility to pursue its long-term strategy to increase traffic and improve performance.

P.F. Chang’s, which operates namesake Bistro restaurants and the smaller Pei Wei quick-service chain, is free to solicit superior proposals through May 31, the parties to the deal said.

“Although we do not anticipate any other potential suitors now, we think any potential buyer will pave the way for greater cost scrutiny, potential closures of underperforming units and a more rapid turnaround,” Miller Tabak restaurant analyst Stephen Anderson wrote in a note to clients.

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