CKE Restaurants Inc., parent company of Carl's Jr. and Hardee's, has received an alternative takeover bid, which could lead to a superior proposal, the company said in a statement. The company's definitive merger agreement with private equity firm Thomas H. Lee Partners -- that was announced in February -- allowed CKE 40 days to seek other offers. The latest announcement came as the time period was set to expire.
The new offer by an excluded party to acquire all company's outstanding shares does not include evidence of committed financing and is subject to several conditions, including completion of due diligence and the negotiation of a mutually acceptable definitive agreement, the company said. Negotiations and discussions with the party can continue until 12:01 p.m. Eastern time April 27.
On Tuesday, Porter Orlin LLC, a New York-based investment manager and shareholder of nearly 2.3 million shares in CKE, submitted a letter to the company expressing its strong dissatisfaction with the recently announced transaction with THL Partners to take CKE private at $11.05 per share.
In the letter, Porter Olin said the bid price "substantially undervalues the business."
Moreover, selling the company at this time, under present market conditions virtually ensures that shareholders will not realize the true value of their investment. This deal strikes us as an opportunistic action by management to take the company from shareholders at the cheapest price possible, depriving us of the opportunity to participate in the future growth of this franchise.Only recently, CKE Management visited us in our offices, and outlined various positive developments which presage improved results. Among these are improving sales, and the fact that in the coming year remodeling expenses will be nearing completion, thus boosting free cash flow dramatically. Given that California, a significant market for the company, is also now beginning to emerge from its doldrums, the company will enjoy that benefit in coming quarters and years.
Porter Olin also said it believes the timeframe for soliciting competing bids is too brief.
CKE's board of directors has not changed its recommendation on its pending merger with affiliates of THL Partners, the company said.
