Steak n Shake to merge with Western Sizzlin for $38.8M
Fast food dining chain The Steak n Shake Holding Company has announced that its subsidiary Steak n Shake Operations is merging with Western Sizzlin in a deal valued at approximately $38.8 million, according to ChainLeader.com
Roanoke, Va.-based Western Sizzlin has also declared a special dividend payable to Western stockholders in the form of Steak n Shake common stock that is currently owned by an investment subsidiary of Western.
The dividend and the merger are estimated to have an aggregate transaction value of approximately $38.8 million. The market price of Steak n Shake's common stock will fluctuate before the special dividend payable to Western stockholders is distributed.
Indianapolis-based Steak n Shake is a restaurant chain founded in 1934 that offers classic American food like burgers and milkshakes. The holding company operates 485 restaurants throughout the country and is best known for its Steakburger.
Western Sizzlin Corporation owns a number of subsidiaries, with its primary business activities conducted through Western Sizzlin Franchise Corporation and Western Sizzlin Stores Inc., which franchise and operates 110 restaurants in 19 states.
The merger agreement currently provides for Western Sizzlin
stockholders subordinated debentures of Steak n Shake with a principal amount of about $23 million.
Closing of the merger transaction is subject to satisfaction by the parties of certain conditions, including approval by Western's stockholders.
Western Sizzlin Chief Financial Officer Robyn Mabe told WinmoEdge that the company is unable to communicate much more than what was already outlined in the press release.
She did say that what prompted Steak n Shake and Western Sizzlin to merge is that Chief Executive Officer Sardar Biglari presides over both companies.
Mabe added that the prospect of leveraging synergies in the restaurant industry is also an attractive opportunity for both parties. She said that Steak n Shake is looking to enter into new markets and that the companies’ main focus will be on franchising.
She said that geographical presence is another aspect of the merger that Steak n Shake found to be beneficial. Mabe said that there are also additional synergies to take advantage of in terms of servicing franchisees.
No marketing-related details have been discussed or fleshed out yet, particularly as it relates to the Steak n Shake’s and Western Sizzlin’s future media plans and outreach strategy moving forward, Mabe said.
While Steak n Shake works with external agencies – Chicago-based Ogilvy Public Relations for its marketing and PR efforts, according to The List database – our source said that Wetsern Sizzlin handles all of its initiatives in-house.
According to The Nielsen Company, Steak n Shake spent about $17.1 million on national media in 2008. About $14.6 million was spent on spot television ads, $2.1 million was spent on outdoor ads and about $200,000 was spent on local newspaper ads.
The Nielsen Company also reported that Western Sizzlin spent about $200,000 on media in 2008. About $130,000 was spent on spot television, $60,000 was spent on outdoor ads and about $20,000 was spent on local newspaper ads.
Our source said that the merger agreement will help both companies leverage each other’s brands, so while there may not be an opportunity with Western Sizzlin, there could be potential projects or marketing partnerships with Steak n Shake available in the coming months as the two companies collaborate to add new franchises.
The Steak 'n Shake Company
500 Century Building
36 South Pennsylvania Street
Indianapolis, IN 46204
Senior Vice President, Marketing
Chairman & Chief Executive Officer