FRANCE - Stampede over Colony’s Buffalo Grill stakes

However, the shares are being offered at the same price which Colony Capital paid in the EUR 340m public-to-private Buffalo Grill in July 2005. Its funds, Colony Investors and Colyzeo, took 25% and 50% equity stakes respectively. Following the deal, the remaining 25% interest remained quoted on Eurolist C until mid-October, when a public tender offer was made to withdraw the firm completely from the stock exchange. A senior debt package amounting to around EUR 140m was underwritten by IXIS.

The hedge fund, Amber Funds, had originally refused to relinquish its shares. According to Neuville, Colony has made a special agreement for the fund to maintain its shareholding in the group indirectly. Following valuations made by Moneta she is urging the public tender offer to be made at EUR 25 a share.

Buffalo Grill was established in 1980 when its first beef restaurant opened in Avrainville, in the south of Paris. Rapid growth followed, with branches opening up in Spain, Belgium, Switzerland and Luxembourg. The chain currently comprises around 280 restaurants. Although its turnover had dipped to EUR 235m in 2003, in 2004 the group registered EUR 267m in revenues. Some 6,700 employees are employed across the Buffalo Grill franchise, but the company itself has a staff of 4,000. With the exception of fast-food giants McDonalds and Quick, it is the French leader of its market. The aims to spread across Southern Europe, opening around 10-20 new restaurants a year across France and Europe.

The large amount of media attention lavished on Buffalo Grill over the years greatly hindered the sale process. The outbreaks of mad cow disease in 1995 and again in 2000 caused the firm to suffer substantial financial difficulties. These were compounded in 2002 when an employee took company managers to court for allegedly buying beef from the UK during the French embargo. The complaint was unfounded, but further problems lay ahead. Patrick Lemarié, who acted as the vendor’s corporate financier at Sodica (Crédit Agricole), explains that Buffalo Grill’s sale process has taken no less than 18 months to complete. ‘A letter of intent had been signed in early 2004, but the group in question was forced to pull out due to a food scare in a Parisian restaurant. The branch closed down for a few days and the alert again turned out to be unfounded, potential buyers remained wary.'

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