Church’s, Popeyes Agree On Merger
SAN ANTONIO (AP) _ Church’s Fried Chicken Inc. has agreed to merge with Popeyes Famous Fried Chicken and Biscuits, ending a four-month long hostile takeover battle in which federal judges ultimately sided with Popeyes.
In the agreement reached late Wednesday, Popeyes owner Al Copeland said he would purchase up to 30.1 million shares, or about 86.5 percent of Church’s outstanding shares, in a tender offer worth about $330 million, or $11 per share.
Each share of Church’s not purchased in the tender offer will be converted to .44 share of a new series of redeemable preferred stock to be issued by the corporation surviving the merger, the companies said in a jointly issued statement.
″After having met Popeyes’ management during the due diligence process over the past month, we are excited about the opportunity of combining our two organizations,″ Church’s president and chief executive officer Ernest Renaud said in the statement.
Popeyes previously had offered about $290 million for San Antonio-based Church’s. During the hostile takeover process, Church’s sued Popeyes, closed 120 restaurants to make the company more profitable and put itself on the auction block.
The companies’ statement said that Canadian Imperial Bank of Commerce has offered to provide up to $300 million and Merrill Lynch & Co. has offered up to $178 million in financing for the tender offer.
The statement did not say what the new company would be called and whether any jobs would be lost.
No. 3 Popeyes had been attempting since November to take over No. 2 Church’s, a publicly held company rocked by management and marketing problems and plummeting sales over the last several years.
″I am pleased that we have agreed to this merger and believe it will create a very strong No. 2 fast food fried chicken chain,″ he said.
Church’s shares closed at $9, up 12 1/2 cents on Wednesday. Trading in the stock was delayed today due to an order imbalance.
Church’s, currently No. 2 behind Kentucky Fried Chicken, has about 1,478 restaurants. No. 3 Popeyes has about 703 restaurants.
In documents submitted to a federal court during the takeover process, Popeyes said that if it acquired Church’s it would close 250 Church’s restaurants, rename 303 others as Popeyes, sell 440 others for about $160 million and keep about 83 with the Church’s name.
Church’s, founded in 1952 by George Church Sr., grew steadily over the years, but internal bickering, including a leveraged buyout attempt, and other management and marketing problems the last several years began taking its toll on the company.
The company’s stock plummeted as various management teams tried new menu items that didn’t work.
Church’s sales have gone down steadily, from $639 million in fiscal year 1985 to $577 in 1986 and $533 in 1987. Popeyes, meanwhile, is expected to have sales about $480 million this year.
Renaud, who took over the ailing company last summer, said that different managers and company directors overbuilt and never invested their money back into the improvement of the stores or in the employees.
″They took their eyes off the ball. They forgot about the customer and the employees,″ he said.
Church’s sued Popeyes, arguing that former Church’s executives working for Popeyes took with them information that was used in the buyout proposal. Church’s also adopted a ″poison pill″ that would make it more difficult for an acquistion.
Rulings by federal judges in San Antonio and New Orleans, however, had sided with Popeyes.
″Church’s had been seeking other interested parties for four months without any success and we’ve said that ours is a good offer and a natural fit for both companies and wil make them both stronger,″ Popeyes spokesman Mark McKinnon said.