Grace to sell its American Cafe chain for $3.5 million

W. R.

October 01, 1993|By Michael Dresser | Michael Dresser,Staff Writer

W. R. Grace & Co., a chemical industry giant, has ended an ill-fated venture into the food business by agreeing to sell its American Cafe chain for a bargain-basement price averaging $233,000 per restaurant.

Magic Restaurants Inc. of Yonkers, N.Y., announced yesterday that it signed a letter of intent to acquire the chain of 15 Baltimore-Washington restaurants from a Grace subsidiary for about $3.5 million in cash and notes.

"We got a very fair price to enter a market of that size with good penetration," said Gary Rogers, Magic's president. Magic operates in the New York metropolitan area.

The deal apparently brings to an end an investment that began after former Grace Chief Executive J. Peter Grace enjoyed a meal at one of the restaurants and decided to acquire the chain in 1986. Since 1990, Grace has been trying to divest itself of many of the "noncore" acquisitions he made in the 1980s.

For the American Cafe, the acquisition could bring a return to growth. Mr. Rogers said Magic, an aggressively expanding company, plans to franchise the American Cafe concept in new markets.

Magic's stock closed up 12.5 cents, at $5.125, on volume of 118,000 shares, about four times its three-month daily average of 32,500 shares.

American Cafe, with $20 million in annual sales, operates four restaurants in the Baltimore area, including one at Harborplace.

Mr. Rogers said the company would renovate the Harborplace restaurant and would likely retain the American Cafe format there. But the future of several other Maryland restaurants is uncertain.

He said that his company is likely to sell the American Cafe on Pennsylvania Avenue in Towson or convert it to one of Magic's other restaurants.

No decisions have been made regarding the American Cafes in Columbia or Owings Mills Town Center, he said.

The other 11 restaurants are in the Washington metropolitan area.

The acquisition will mean layoffs for some employees as Magic brings in its own management team, Mr. Rogers said.

The 12-restaurant Magic chain, with $10.6 million in sales in the first three quarters of this year, will more than double its size with the American Cafe acquisition. The company said that with expansion and the completion of the deal in December, it will own 28 restaurants with annual sales of nearly $45 million.

Magic owns six restaurants under the name Camilla's Cafe, which Mr. Rogers described as American with an Italian flair. It also operates five Red Robin Burger and Spirits Emporium franchises and one Rockwells American Restaurant in metropolitan New York.

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