Press Release:
Bob, I think I know who has been buying the warrants lately. Maybe I am missing something and the reduction of the outstanding warrants will help the stock price. I hope this deal works out well for CHGO shareholders.
Rory
Monday March 22, 8:31 am Eastern Time
Company Press Release
Chicago Pizza Completes Transaction
With Strategic Investor and
Announces Warrant Repurchase
Program
MISSION VIEJO, Calif.--(BUSINESS WIRE)--March 22, 1999--Chicago Pizza & Brewery Inc.
(Nasdaq:CHGO - news; Nasdaq:CHGOW - news) Monday announced that it has completed the
previously announced sale of 1.25 million shares of common stock to a strategic investor.
The total consideration received by the company consisted of both cash and non-cash items that the
company, after consultation with outside advisers, believes equals or exceeds the appropriate value
of the shares sold. As a result of the transaction, the investor -- ASSI Inc. -- now owns
approximately 16.3 percent of the company's outstanding shares.
According to Paul Motenko, the company's chief executive officer, ''Both as an officer of the
company and as one of its largest shareholders, I am extremely excited that we have been able to
bring ASSI back into the fold as a strategic investor. ASSI has been an invaluable resource to the
company over the years, having provided the majority of the funds used in our acquisition of the
Pietro's restaurants in the Pacific Northwest.
''ASSI had disagreed with our strategy to emphasize video poker in our Northwest operations,
which was one reason that it sold its prior equity stake early in 1998. Subsequent events have shown
that video poker, while generating some revenue, will most likely be a minor factor in the company's
Northwest operations.''
Per Jerry Hennessy, company president, ''ASSI and its sole shareholder have proven to have an
astute understanding of the restaurant industry as well as connections in the financial community. They
have a tremendous amount of experience in site financing and development that the company will be
able to utilize to its advantage.
''We are already seeing that the strengthened relationship with ASSI will result in opportunities for
the company, including investment banking relationships and potential acquisitions, that would not
have otherwise been available. Paul Motenko and I are convinced that a more aggressive strategy is
critical to the company's future, and we believe that our relationship with ASSI will facilitate
execution of that strategy.''
In exchange for the 1.25 million shares, which are subject to restrictions on resale, including a right of
first refusal in favor of the company or its designees, the company received from ASSI $1 million in
cash, the termination of two consulting agreements between Chicago Pizza and ASSI, and a release
of any claims that ASSI and its affiliates may have had against the company relating to the consulting
agreements and prior investments by ASSI and its affiliates in the company.
In addition, ASSI agreed to the cancellation of 3.2 million redeemable warrants. Such warrants
comprised more than 25 percent of the company's outstanding redeemable warrants.
According to Motenko, ''Investment bankers have advised us for some time that the warrant
overhang was one factor preventing the company from moving to the next level and obtaining
appropriate attention in the investment community, and the company's board of directors has been
grappling for months with methods to minimize the overhang that the redeemable warrants have had
on the market for the company's common stock.
''Based on the favorable initial reactions we have received from several investment banks, we believe
that the cancellation of this block of over 25 percent of the outstanding warrants, when combined
with the other benefits of this transaction, has significantly increased the company's attractiveness to
the investment community and potential financing sources.''
Robert Cherry, a vice president of corporate finance at Trenwith Securities Inc. in Orange County,
indicated that: ''This is a very favorable deal for the company. In one transaction, the company has
been able to raise additional working capital, eliminate a significant portion of its redeemable
warrants, cancel consulting agreements and resolve potential conflicts that could have resulted in
future charges, and strengthened its relationship with a strategic investor and potential financing
source who understands the company's business and long-term strategy. I have to believe that the
investment banking community will look at this transaction favorably.''
As an additional part of the consideration for the common stock, ASSI agreed to finance or
guarantee financing of potential future development projects of the company, subject to project
pre-commitment approval. Per Motenko, ''ASSI has shown in the past a willingness to fund
company projects, and we feel this current commitment will be one of the most valuable elements of
the agreement.''
In connection with its investment, ASSI received certain demand and piggyback registration rights as
well as a commitment from the company to use its best efforts to have two of the company's
directors be persons designated by ASSI and to cause each of such designees to be included in the
slate of director nominees for election at each annual meeting of shareholders over the next three
years.
ASSI also received a commitment from Motenko and Hennessy, the company's principal executive
officers, to vote their shares of common stock in favor of electing ASSI's board nominees in certain
circumstances. Such rights terminate at such time as ASSI and its affiliates no longer own at least 5
percent of the company's outstanding common stock.
The company also announced that the court had denied the attempts by La Pizza Loca Inc. and its
controlling stockholder, Alex Meruelo, to prevent the company from consummating the transaction
with ASSI.
Hennessy said, ''We are gratified by the court's ruling. The company and each of its directors,
including an investment banker, the CFO of a public company that owns a large supermarket chain,
and the chairman of a prominent local accounting firm, determined that the transaction with ASSI is in
the best long-term interests of the company and its shareholders.''
Meruelo had previously proposed that the company merge with La Pizza Loca. However, as
Hennessy pointed out, such an offer ''could never have closed as proposed. Even if it was not
subject to contingencies which made the proposal impossible in our view, the price and deal structure
was inadequate and not in the best interest of shareholders. In contrast, we believe the transaction
with ASSI will facilitate moving the company forward to realize shareholder value, not selling them
out.''
In addition, Chicago Pizza announced that its board of directors has authorized the company to
commence a redeemable warrant repurchase program. The company may purchase a portion of its
outstanding redeemable warrants from time to time in open market transactions at current market
prices or in negotiated block transactions for a maximum aggregate price of $500,000.
The board of directors believes that, at their current prices, repurchase of a portion of the
redeemable warrants is in the best interests of the company and its shareholders. As of the date
hereof, there are 8,884,584 outstanding redeemable warrants. The company will continue to evaluate
the market price for the redeemable warrants and other factors, and may determine to suspend or
terminate the program at any time in its discretion.
Chicago Pizza & Brewery owns 28 restaurants, including 11 BJ's in Arcadia, Brea, Balboa,
Huntington Beach, Laguna Beach, Seal Beach, La Jolla, Belmont Shore and Westwood, Calif.; in
Boulder, Colo.; and Lahaina, Hawaii. Seventeen BJ's and Pietro's restaurants are located in Oregon
and Washington.
The information presented herein contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, which are intended to be converted by the
safe harbors created thereby. The company's results may differ significantly from the results indicated
by such forward-looking statements. Factors that might cause such differences include, but are not
limited to: (1) the company's ability to finance or fund its business plan, (2) the company's ability to
manage growth and conversions, (3) construction delays, (4) restaurant and brewery industry
competition and other such industry considerations, (5) marketing and other limitations based on the
company's historic concentration in Southern California and current concentration in the Northwest,
(6) consumer trends, (7) increased food costs and wages, including without limitation, the recent
increase in the minimum wage, and (8) other general economic and regulatory conditions.
Contact:
Chicago Pizza & Brewery Inc., Mission Viejo
Paul Motenko, 949/367-8616
More Quotes and News:
Chicago Pizza & Brewery Inc (Nasdaq:CHGO - news;
Nasdaq:CHGOW - news)
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