Fat Brands, the owner of the fast-casual restaurant chain Fatburger, is buying the 1950s-themed restaurant franchise Johnny Rockets for $25 million.
Fat Brands' share price more than doubled in early trading Thursday. The stock climbed from $3.53 a share at the end of trading Wednesday to an opening of $9.30 a share Thursday - or an increase of 2.6 times. The issue fell back to $7.01 a share at the closing bell, according to Nasdaq data.
Fat Brands agreed with private equity company Sun Capital Partners, Inc., the current owner of Johnny Rockets, to purchase the franchise for $25 million, the restaurant company said in a statement. Fat Brands will pay for the deal with proceeds from its securitization facility and cash on hand. The deal is expected to be completed next month.
The agreement includes the takeover of Johnny Rockets' 325 outlets in more than 29 countries. Its restaurants are known for their Second World War memorabilia, 1950s jukeboxes and examples of that decade's advertising. The first Johnny Rockets opened in 1986 in Los Angeles' Melrose Avenue.
Fat Brands will make some changes to operations and themes, Fat Brands' chief executive officer Andy Wiederhorn said. Apart from Fatburger, Fat Brands owns Ponderosa, Hurricane Grill & Wings, Elevation Burger and Bonanza Steakhouses.
The continued economic downturn caused by the coronavirus pandemic has resulted in several mergers and acquisitions as companies combine operations and resources to weather the storm.
Both Fat Brands and Johnny Rockets have been struggling over the past few quarters as the pandemic forced them to close stores. Even with the reopening of most of their outlets, revenue is still low.
For its second quarter Fat Brands' sales fell by close to 50 percent. Its share price has suffered - dropping by close to 25 percent since the start of the year.
