Zacks_Analysts' Blog : Granite Bags Yet Another Cadillac - Analyst Blog

Granite City Food & Brewery Ltd. (GCFB) recently completed the acquisition of the assets of another Cadillac Ranch All American Bar & Grill restaurant in Miami, Florida for $1.4 million. The acquisition is in sync with the company’s master asset purchase agreement, signed in November this year, to buy the net assets of seven Cadillac restaurants for $9.0 million. Granite City also has the option of buying the assets of an eighth restaurant in Annapolis, Maryland for nominal consideration.

Per the deal, Granite City first targeted one of the Cadillac restaurants at the Mall of America in Bloomington, Minnesota and bought its assets for $1.4 million. Following the latest purchase of the Miami unit, the master deal now calls for the acquisition of up to five additional Cadillac Ranch restaurants. Granite City management sees some significant synergies related to two brands, which will be incorporated between the two chains. Additionally, Granite City expects to leverage its existing overhead and provide an impetus to the Cadillac Ranch management team in order to boost their current performance.

In May 2011, Granite City received a $9 million infusion of equity capital from Concept Development Partners (CDP) in partnership with Dallas-based private equity firm, CIC Partners. Additionally, Granite received $10 million in debt financing from the Fifth Third Bank.  We believe that this infusion of capital will enhance the company’s organic as well as inorganic growth. Granite City has been chalking out growth plans for existing stores along with the construction of new stores such as the recently announced Troy, Michigan store slated to open in early 2012.

Considering the recent acquisition, Granite City, a modern American restaurant and brewery, currently operates 28 restaurants across 12 states. We maintain our long-term Neutral recommendation on Granite City.

Merger and acquisition activities are also gaining momentum in the restaurant industry. The companies are looking at potential business partners to foray into different zones and unlock value. As a point of reference, another big-time eatery in the U.S., Darden Restaurants Inc. (DRI) inked a deal to purchase two Eddie V's restaurant brands –– Eddie V's Prime Seafood and Wildfish Seafood Grille.