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Landry's saves Rainforest
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September 26, 2000: 4:14 p.m. ET
Seafood chain pays $74M for theme restaurant in second merger attempt
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NEW YORK (CNNfn) - Environmentally friendly Rainforest Café Inc., one of the last of a dying breed of independent theme restaurants, succumbed to the law of the jungle Tuesday, agreeing to be acquired by Landry's Seafood Restaurant Inc. for about $74 million in cash.
Landry's, which already holds a 4.5 percent stake in Rainforest, will pay $3.25 a share for the theme restaurant where customers get to eat in a simulated jungle and talk to live parrots. The deal represents a 60 percent premium over Rainforest's closing price of $2.03 on Monday.
The boards of both companies have approved the merger. Rainforest Café can still accept a higher offer from a different source but must pay a $2.5 million break-up fee.
The deal is expected to close by the end of October and is expected to be immediately accretive to Landry's earnings, said Landry chairman Tilman Fertitta.
 Landry's bid is the second time the Houston-based chain has offered to buy Rainforest. In February, Landry offered $125 million in a stock and cash deal, or $5.23 a share, that was eventually terminated by Rainforest's shareholders, Fertitta said.
Hopkins, Minn.-based Rainforest (RAIN: Research, Estimates) owns and operates 29 restaurants in the United States and 11 internationally. The theme restaurant chain operates under the name "Rainforest Café - A Wild Place to Eat and Shop" and features cascading waterfalls and tropical thunderstorms.
The restaurant also offers educational tours where consumers can learn about species that are about to become extinct and efforts to save the rain forest and runs a non-profit organization that supports environmental causes.
In July, Rainforest recorded significant second-quarter losses. Rainforest reported net losses of $101.6 million, or $4.49 a share, compared to net income of $3.9 million, or 16 cents a share, for the same quarter in 1999. The company also took a $101.5 million asset impairment and store closing charge related to the closure of its unit at the Aventura Mall in Miami.
A long line of failures
Theme restaurants, which burst onto the scene in the mid-1990s, have experienced many problems recently. The most notorious, Planet Hollywood International Inc., which was backed by some of Hollywood's biggest stars, filed for bankruptcy in October 1999.
The Rainforest acquisition signals the end of the theme restaurant fad that attempts to draw customers by offering something outside of food. Planet Hollywood provided the glamor of Tinseltown stars while Fashion Café was owned by fashion models. Fashion Café failed while Planet Hollywood is mired in bankruptcy.
Such restaurants have trouble drawing repeat customers, one analyst said, who declined to speak for the record. "How many times can I walk into a restaurant and enjoy Hollywood memorabilia?" the analyst said. "You have to offer something to the consumer. The meal is not a great value."
Unlike chains like Planet Hollywood, which failed mainly due to market oversaturation, all of Rainforest's restaurants attract business, Fertitta said.
"Their rents are either too high or their restaurants take too much space, which causes many operational expenses," Fertitta said. "We know the restaurant business and we think we can fix their problems."
He estimates that it will take one year to fix those problems.
Landry Seafood (LNY: Research, Estimates) is a casual-dining restaurant chain with over 150 restaurants in 33 states. Landry's operates under several brand names, including Landry's Seafood House, Joe's Crab Shack and the Crab House restaurants.
Rainforest gained $1 Tuesday afternoon to $3.03 -- less than half its 52-week high of $6.75. Landry lost 6 cents to $7. 
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Rainforest Cafe
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