Ruby Tuesday Inc. is being taken private as the Maryville, Tenn.-based restaurant chain struggles to cut its losses and reverse four years of declining sales amid a changing market for casual dining.
An Atlanta-based private equity firm, NRD Capital, said Monday it has agreed to buy Ruby Tuesday, Inc. for about $146 million, or $2.40 a share. The deal for Ruby Tuesday values the firm, including debt, at $335 million, or nearly 21 percent above the closing stock price on Friday for the chain.
The sale announcement boosted shares of Ruby Tuesday by 37 cents per share, or nearly 18.6 percent, to close Monday at $2.36 per share - its highest price since May. The price was still below the peak this year reached in March when the company said it was exploring its alternatives after four consecutive years of declining sales.
NRD Capital is an Atlanta- based private equity firm whose principals have restaurant experience with Popeyes Louisiana Kitchen, Checkers, Domino's, Moe's Southwest Grill, and other restaurant franchisors. Under the terms of the agreement, NRD will acquire all of Ruby Tuesday's common stock for $2.40 per share in cash and will assume or retire all debt.
"Our focus at NRD is investing in quality restaurant companies and providing strategic and operational expertise to create sustainable value," said Aziz Hashim, founder of NRD. "With a well-established brand, differentiated from other casual dining restaurants by its Garden Bar, we see significant opportunities to drive value for Ruby Tuesday."
Hashim said as a private company, "we will be able to take a long-term view on Ruby Tuesday, allowing us to make an investments in people, product, and customer experience, without public company constraints."
The acquisition is expected to be completed during the first quarter of 2018.
Stephen Sadove, the non-executive Chairman of Ruby Tuesday, said the NRD offer was deemed to be "the most promising opportunity to realize the highest value for our stockholders while providing the best path forward for the Ruby Tuesday brand, its employees, franchisees, and loyal customers.
"NRD Capital has a distinguished track record of achieving and maintaining profitable growth for restaurant concepts and will be an excellent partner to lead Ruby Tuesday going forward," Sadove said.
James Hyatt became chief executive of Ruby Tuesday in April and said he wants to focus on improving customer experience, boosting sales and delivering profitability.
The company recently updated its menu, with a focus on fresher ingredients, and rolled out a renovated salad bar.
Ruby Tuesday said Monday it narrowed its losses in the most recent fiscal quarter to $9.8 million, or 16 cents per share, compared with a loss of $39.7 million, or 66 cents per share, a year ago. Revenues fell by 15.3 percent to $217.3 million over the past year, due primarily to 95 restaurants closing in August 2016.
Ruby Tuesday sales at restaurants open for at least one year fell 5.8 percent.
In the Chattanooga region, Ruby Tuesday operates restaurants in Hixson and Athens, Tenn., in Scottsboro and Fort Payne, Ala., and in Calhoun, Ga.
As of September, there were 599 Ruby Tuesday restaurants in 41 states and 14 foreign countries, down from 736 locations in 2015. Most restaurants are company-owned.
The first Ruby Tuesday restaurant was opened in 1972 near the campus of the University of Tennessee in Knoxville.
Casual sit-down restaurants have been hit in recent years by the rise of delivery options and fast-casual chains, such as Chipotle Mexican Grill Inc. and Shake Shack Inc., and a decline in lunchtime restaurant eating.
Even as Ruby Tuesday and others have tried to adapt through catering and takeout offerings, they make more money serving meals inside restaurants, where soft drinks, alcoholic beverages, appetizers and desserts boost margins.
Atlanta-based NRD, which invests in franchised and multilocation businesses, closed its second fund with $104 million in July. The company has invested in two other restaurant franchises, Frisch's Restaurants Inc., which the firm acquired in a roughly $175 million take- private transaction in 2015, and an investment earlier this year in Fuzzy's Taco Shop.
The Associated Press and other wire services contributed to this report
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.