2nd
Lone Star investor may fight sale - Deutsche Bank AG files
paperwork allowing it to seek a separate appraisal of its
Lone Star Steakhouse shares
A second major stockholder of Lone Star Steakhouse &
Saloon has said it might vote against the planned sale
of the Wichita-based restaurant chain.
On Monday, German banking giant Deutsche Bank AG filed
a notice with the U.S. Securities Exchange Commission
that it may seek a separate appraisal of its 2.1 million
shares of Lone Star stock.
Lone Star Steakhouse on Aug. 18 announced that it had
signed a deal to sell itself to Lone Star Funds of Dallas
for $27.10 per share. The two companies are unrelated.
The deal is worth $613.7 million.
The negotiated share price represents a 15 percent premium
over the share price before the announcement, Lone Star
Steakhouse chief executive Jamie Coulter said at the time.
He said in the company's preliminary proxy statement that
the price was determined by negotiation and confirmed
as fair by two investment banks.
Shareholders must still approve the deal. No date has
been set for the vote.
But some stockholders have been publicly unhappy with
the $27.10 price.
Deutsche Bank, which owns 9.8 percent of Lone Star, may
be working to get a higher price through its Dissenter's
Rights, said analyst Michael Smith of Oppenheimer &
Co. of New York.
"You can take that to the bank, they're not happy,"
Smith said.
Under the corporate law of Delaware, where Lone Star
Steakhouse is incorporated, Deutsche Bank has the right
to seek an independent appraisal after the merger is complete.
If the Delaware court finds the $27.10 too low, the bank
will get a higher price from Lone Star Funds. But the
bank could lose money if the appraisal comes in lower.
Deutsche Bank apparently thinks it can succeed because
the company continued to buy Lone Star stock after the
deal was announced.
The market must agree that something will push the ultimate
purchase price higher because Lone Star shares have traded
above $27.10 since the announcement, reaching $28.03 on
Monday before closing at $27.80.
A Deutsche Bank spokeswoman did not return calls for
comment on Monday. Lone Star Steakhouse officials also
did not return calls seeking comment.
If the bank does vote against the deal, it would be the
second major shareholder to voice unhappiness with the
price.
Hedge fund Barington Capital Group LP of New York, which
owns about 9.4 percent of Lone Star stock, said in an
Aug. 30 filing with the SEC that the share price is too
low. It said it is still evaluating the deal.
If shareholder reaction derails the deal, it will be
very expensive. One of the deal's provisions would pay
Lone Star Funds up to $19.5 million if Lone Star Steakhouse
doesn't complete the deal.
