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Landry’s Subsidiary Bids $50 Million for Palm Steakhouse Chain (1)

Feb. 21, 2020, 7:36 PMUpdated: Feb. 21, 2020, 9:45 PM

Landry’s Inc. subsidiary Golden Nugget LLC offered $50 million for the bankrupt Palm steakhouse chain in the latest bid by the dining and entertainment giant to snap up distressed restaurants.

Landry’s, which already owns Morton’s The Steakhouse and Mastro’s Restaurants, would take control of 21 U.S. Palm locations, as well as its intellectual property. The company is owned by Tilman J. Fertitta, who also controls the NBA’s Houston Rockets.

In recent months, Landry’s has also purchased out of bankruptcy both Houlihan’s and Restaurants Unlimited, a group of West Coast restaurants.

A recent wave of faltering restaurants presents opportunities for better-funded rivals, said Howard Weg, former Robins Kaplan LLP partner and founder of HJW Advisor in Los Angeles. HJW provides legal and business advisory services for financially distressed companies.

“With a good brand and great locations—staying away from malls—if you can control expenses and have good management, you can do very well,” Weg said.

The steakhouse business is a natural hunting ground for Landry’s.

“Landry’s has a lot of equity in the steak business, including Morton’s The Steakhouse and Mastro’s restaurants,” said Michael Halen, senior restaurant analyst at Bloomberg Intelligence.

Serving as a stalking horse bidder “is a low risk way to acquire more assets,” Halen said.

Upcoming Auction

Bankrupt Just One More Restaurant Corp., which owns the intellectual property and franchise rights to The Palm, filed a motion Thursday with the U.S. Bankruptcy Court for the Middle District of Florida to conduct a March 9 auction for substantially all assets associated with the restaurants.

The Chapter 7 trustee for two of the company’s major shareholders, who own a number of companies operating individual Palm restaurants, are also sellers in the motion.

Naples, Fla.-based Just One More Restaurant filed Chapter 11 in March 2019 after a group of its minority shareholders won a $119 million judgment on a derivative lawsuit against majority shareholders Bruce E. Bozzi Sr. and Walter J. Ganzi Jr., grandsons of The Palm’s founders.

The minority shareholders, also descendants of The Palm’s founders, showed that Bozzi and Ganzi had fraudulently undervalued Just One More Restaurant’s interests for their own gain, at the expense of the company and other shareholders.

Faced with the judgment, Bozzi and Ganzi filed individual Chapter 7 cases in October 2019. Robert E. Tardif Jr. was appointed in each case to serve as trustee, charged with administering the bankruptcy estates for the benefit of creditors.

Bozzi and Ganzi own companies that operate 21 Palm restaurants, which are part of the sale being offered jointly with Just One More Restaurant. The bankrupt company is being run by an independent restructuring officer.

Once the sellers have selected a winning bid, they will seek the Florida bankruptcy court’s approval of the sale.

The case is In re Just One More Restaurant Corp., Bankr. M.D. Fla., No. 9:19-01947, Joint Sale Motion 2/20/20.

(Updated with additional reporting throughout.)

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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