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Ruby Tuesday, Inc. Message Board

  • maullertechnique maullertechnique Jun 8, 2012 9:13 PM Flag

    Strategic Alternatives

    Given Beall's departure, one has to imagine that the odds of a strategic alternative discussion by the board have increased. Currently, there is strong institutional appetite for the asset class as evidenced by the recent wave of sub- billion dollar public company buyouts (O'Charleys, CPK, Benihana, Mccormick and Schmick's, Mortons, Carls Jr, Rubios). Think of all the pe firms or strategics that made it to best and finals rounds who didnt get a bite at the apple and who, after spending time and money on consultants, are comfortable with the industry. Likewise, given the spread between the (high) cost of equity and (historically low) cost of debt combined with the financiability of their assets (chiefly the fee simple real estate), a PE firm could put 4-5x of debt (of EBITDA)on the company and milk the company's cash flows even if SSS are treading down. If Benihana, which has operational issues as well, can sale to angelo gordon for over 10x EBITDA and they have no real assets, how much is RT worth?

    Even if the board decides against a sale, they still need to compare the ROI of investing in conversions to LIME, further building out RT versus share repurchases. The company can't continue to pay back 2-3% debt indefinitely, especially when the company has an after-tax free cash yield of 20%+...

    While they ultimately may not sale or do a buy-back, it would be foolish for them not to communicate to the street a strategic alternative discussion given that the company needs to take a direction, especially after the departure. I personally think the stock will pop on this news.

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    • Jim O'Neil of BAGL (60% owned by Einseins is looking for a buy out or merger.

      With RT diversifying into Mexican it may be that they will now also diversify into the Brealfast and Lunch Bagel sectow which would make RT one of the broadest restaraunt stocks in the market today.

      Jim O'Neil ran the Yum brands chains in Canada before joining BAGL and 60% OF THE STOCK IS OWNED BY David Einhorn so if he wants to do it it is a done deal.

      BAGl will go to 25-30, and David Einhorn will make a fortune.

      Watch closely...RT insiders are not stupid, they re buying for a reason and no technical indicators can anticipate the results of a merger or buy out.

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