Midway Investors, the newly formed affiliate of BancBoston Capital and Minneapolis-based private equity firm Goldner Hawn Johnson & Morrison Inc. and Fairmont Capital, announced on Feb. 15 its intention to buy Vicorp Restaurants Inc., a company that operates or franchises approximately 374 family-style restaurants in 27 states. In accordance with the terms of the agreement, the investor group will buy the public company for approximately $173 million with shareholders receiving $25.65 per share.
Salomon Smith Barney was the financial adviser to Denver-based Vicorp’s special committee considering the transaction and Cravath, Swaine & Moore was its legal counsel. Sherman & Howard LLC represented the company.
Upon completion of the deal, Vicorp will operate as a private company in Denver and will retain the same management team.
However, the deal may not go as smoothly as originally thought. On Feb. 20, two plaintiffs filed separate, but identical, class action lawsuits representing the shareholders against Vicorp. According to a company statement, the lawsuit alleges that “the consideration to be received by Vicorp shareholders in the merger is inadequate because it did not result from an open bidding or market check’ mechanism . . . [And] that the directors of Vicorp and certain of its officers breached their fiduciary duties to the Vicorp shareholders by failing to exercise ordinary care and diligence in connection with the merger and had conflicts of interest in the transaction.”
The plaintiffs are seeking class action certification and an injunction to prohibit the sale as well as the expenses of filing suit.
Vicorp claims that the complaints are “without merit.” In the original announcement of the deal, prior to the lawsuit, Joseph Trungale, president and chief executive officer of Vicorp, said: “This transaction is positive for all parties. It will provide value to the stockholders while allowing us to move the company forward by focusing on strong profitability at the store level and yet continuing with moderate growth.”
At press time, Vicorp shares were trading on the Nasdaq at a 52-week high of $24.87. The company’s sales in 2000 were $372 million, a 3.6% increase from the previous year.
The transaction is now pending shareholder approval.