Granite City Food & Brewery, an ambitious but perennially money-losing restaurant chain, is getting a new majority owner along with an equity infusion of $9 million.
As part of the deal announced Tuesday, Granite City's chief executive, Steven Wagenheim, will become "president and founder." Robert Doran, a 35-year restaurant industry veteran and onetime high ranking McDonald's executive, will take over the CEO post at the St. Louis Park company.
Doran's CDP Management Partners is teaming up with Dallas-based private equity firm CIC Partners to purchase $9 million in newly issued convertible preferred stock in Granite City. The Doran-CIC partnership, called Concept Development Partners, will also arrange $10 million in new debt financing for Granite City.
Of the $19 million in combined debt and equity proceeds, about $7 million will be used to repurchase 3 million Granite City shares from the company's current majority owner, DHW Leasing. A good chunk of the remainder will be used to jump-start Granite City's ambitious but underfunded growth plans; the chain had planned to be twice its current size by now.
"This is a company that has always been undercapitalized," Wagenheim said. "They want to grow this thing up," Wagenheim said about the new majority owners.
Granite City Food & Brewery is a casual dining chain that started with a single restaurant in St. Cloud in 1999 and now has 26 outlets in 11 states, including 5 in Minnesota. The company went public in 2000, and its stock hit a high of $38 in early 2007.
The shares closed Tuesday at $1.91, down 8 cents or 3.79 percent.
Doran, a past executive vice president at McDonald's, didn't return a phone call but said in a news release he has "come across few [restaurant] concepts that have impressed me as much as Granite City."
Granite City, which had $86 million in revenue last year, hasn't turned a net profit as a publicly traded company. Still, Wagenheim said operating profits this year are the healthiest they've been since the onset of the Great Recession, while same-store sales are growing at rates above the industry average.
After the deal is closed, Concept Development Partners will own about 58 percent of Granite City's shares. DHW Leasing, which now owns about 64 percent of Granite City, will see its stake fall to about 16 percent, Wagenheim said.
DHW is venture of two Sioux Falls, S.D., businessmen, including Donald Dunham, a construction executive who built many of Granite City's restaurants, several of which are leased to the chain. DHW got its stake in Granite City in a debt-for-equity swap last year, getting 28 million shares at 54 cents each in lieu of the $15 million it was owed.
Mike Hughlett • 612-673-7003
