Morton's puts itself up for sale

With recession taking a bit out of fine dining, restaurant group exploring 'strategic alternatives'

Having managed its way through the worst of a recession that took a huge bite out of fine dining, upscale Chicago-based steakhouse chain Morton's Restaurant Group Inc. has hung out a for-sale sign.

The company announced Wednesday it is exploring "strategic alternatives," with a potential sale at the top of the menu.

"It's a sign of the times," said Bonnie Riggs, a restaurant analyst with NPD Group. "There's definitely a changing consumer mindset."

No timetable has been set for a possible sale, which is being pursued with the support of affiliates Castle Harlan Inc. and Laurel Crown Partners LLC, the company's largest shareholders. The board has retained Jefferies & Co. as its financial adviser to assist in the process.

With 77 locations worldwide, including six in the Chicago area, the unapologetically pricey steakhouse was hit hard by the recession, with revenues plunging by nearly 15 percent in 2009 to about $281 million. Bolstered by a beefed-up, lower-priced bar menu, revenues were up 5.3 percent last year, topping $296 million, with a net income of $4.6 million.

"The business has survived, and it does appear we are at the beginning of a positive cycle for us," said Ronald DiNella, vice president and chief financial officer of Morton's Restaurant Group. "The board believes, at this time, this is one of the best ways to maximize shareholder value."

The company is relatively bullish on its prospects for continued recovery in 2011, calling for sales of about $320 million. While still far below its peak revenues of more than $350 million in 2007 and 2008, with the stock price cut to one-third of its pre-recession high, some analysts think Morton's will draw more than a few nibbles from prospective buyers.

"If Morton's were for sale in '07, when they were on an upswing, I'm sure it would have fetched a very nice price," said Darren Tristano, executive vice president of Chicago-based food industry consultancy Technomic Inc. "Right now, where the stock price is and where the industry has been, I think this is more of an opportunity for a buyer."

The company's stock price closed Wednesday at $7.19, up 76 cents, or 11.8 percent. The shares had gained 16 percent in the last 12 months before Wednesday, while the Standard & Poor's 500 restaurant index jumped 22 percent.