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Steak 'n Shake Co. said Thursday that it plans to purchase Western Sizzlin Corp., a holding company that franchises and operates restaurants including Western Sizzlin and Great American Steak & Buffet.
A news release, which referred to a letter of intent by both companies, stated that Western Sizzlin would become a wholly owned subsidiary of Steak 'n Shake.
The acquisition is subject to approval by both companies' boards of directors and Western Sizzlin's stockholders.
Shares of Western Sizzlin rose 9.8 percent on Thursday after the acquisition news. The shares closed Thursday at $14 on the Nasdaq.
It's unclear if the acquisition would affect Western Sizzlin's local headquarters, which moved to Roanoke in 1999.
Robyn Mabe, chief financial officer at Western Sizzlin, was not available for comment.
The news release offered some details about the deal. Before the acquisition is closed, Western Sizzlin will distribute to shareholders the shares of Steak 'n Shake that it owns. The company owns 1.5 million shares of Steak 'n Shake through Western Acquisitions LP, according to its first-quarter report.
At closing, Steak 'n Shake will convert each Western Sizzlin share into a financial instrument worth $8.11 a share. The instrument, called a debenture, will pay an interest rate of 14 percent a year until redeemed, according to the news release.
The total value of the acquisition is unclear.
In its third-quarter earnings report earlier this week, Steak 'n Shake said it may pursue investments, including acquisitions. A news release stated that all decisions related to the acquisitions are handled by the company's chairman and CEO, Sardar Biglari.
Biglari also is chairman and CEO of Western Sizzlin. His hedge fund, the Lion Fund, owns 33 percent of Western Sizzlin, or 934,215 shares, according to Yahoo Finance.
San Antonio-based Biglari rose to power at Steak 'n Shake when he and business partner Philip Cooley unseated from its board some top executives, including the chairman and interim CEO.
Steak 'n Shake has 486 restaurants and sales of $700 million.
On Thursday, Western Sizzlin held its annual meeting in New York City, and Biglari was invited to ring the Nasdaq's closing bell.
This week, the company also reported its first-quarter earnings for three months ended June 30.
Western Sizzlin earned $1.9 million, or 68 cents a share, compared with a loss of approximately $2 million, or 72 cents a share, in 2008.
Sales declined 2.5 percent to $4.4 million from $4.6 million in the first quarter of 2008.
It ended the quarter with restaurant locations in 19 states, including 99 franchise establishments, five company-owned eateries and one joint venture.
Western Sizzlin moved its headquarters to Roanoke in July 1999 when it became a publicly traded company through a reverse-merger acquisition of Austins Steaks & Saloon Inc. of Nebraska. It was called Austins Steaks & Saloon, doing business as Western Sizzlin.
It changed its name to Western Sizzlin Corp. in 2004.
There once were several Western Sizzlin restaurants in the Roanoke Valley, but they all have closed.
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