Chuy's Going To The Market Again
That Chuy’s investment appears to be working out for Goode Partners, the New York-based private equity fund that is the controlling investors in the Texas-based Mexican chain. Goode is selling the bulk of the 4.5 million shares that late yesterday priced at $25 a share.
That price is nearly double Chuy’s $13-a-share debut back in July. It also means that Goode and the fund controlled by the chain’s founders, who are also selling shares, will raise $112.5 million with the secondary offering, nearly 50 percent more than the $76 million Chuy’s raised during its IPO. The secondary offering is expected to close on January 30.
Perhaps not surprising, Chuy’s is up 9 percent today.
Chuy’s has been the best story among the crop of restaurants that went public last year. Michael Young and John Zapp founded the company in 1982 and the pair still controls 5.6 percent of the company heading into the offering. They sold most of the company to Goode Partners in 2006. Goode controls 49.6 percent, but after the offering will control 22.7 of the company’s shares, assuming that underwriters exercise an option enabling them to buy another 675,000 shares of the company.
Chuy’s went public last year despite a market dented by Facebook and economic uncertainty, and during a time when investors began questioning the restaurant industry thanks to commodity costs and health care costs. That same market prevented both Dave & Buster’s and CKE Restaurants from going public.
But Chuy’s is a legitimate growth restaurant chain in the relatively early stages of its cycle. The chain has just 40 locations, mostly in Texas and Tennessee. There are few growth chains that are publicly traded at the moment, and as such investors have given the chain a steep premium—its enterprise value to EBITDA margin is nearly 21X. Not even Chipotle or Panera can say that.
Jefferies and Baird are joint book-running managers for the secondary offering. KeyBanc Capital Markets, Raymond James and Stephens Inc. are co-managers.