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Cheesecake Factory Turns to Private Equity Firm Roark in Coronavirus Crisis

BlackRock was among Cheesecake Factory’s largest shareholders last year.

Private equity firm Roark Capital Group has invested $200 million in publicly-traded Cheesecake Factory, a preferred stock deal that will help the dining chain steer through the Covid-19 downturn.

As part of the agreement, Roark president Paul Ginsberg will join the company’s board as an independent director, according to a Cheesecake Factory statement Monday. Shares of the restaurant operator rose about 1 percent by day’s end. 

“This transaction not only meaningfully enhances our liquidity position to navigate the near-term Covid-19 landscape and get our affected staff members back to work as soon as practicable, but also importantly, solidifies our ability to manage the business for the long-term for all of our stakeholders once we emerge on the other side of this crisis,” David Overton, Cheesecake Factory’s chairman and chief executive officer, said in the statement. “Roark’s investment underscores the strength of our brands, market positioning and long-term growth prospects.”

The company — which owns and runs restaurants under The Cheesecake Factory and North Italia brands and its Fox Restaurant Concepts business — has limited its operations to take-out and curbside service due to the deadly Covid-19 disease, according to its website. The disease, caused by the novel coronavirus, is doing widespread damage to the restaurant industry, with people across the U.S. staying at home on the order of state governors.

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Food and restaurants represent the largest sector for Roark, whose portfolio includes Arby’s, Buffalo Wild Wings, and Cinnabon, according to the firm’s website. PitchBook analysts predicted last month that buyout firms would increasingly invest in private deals with public companies in need of cash amid the coronavirus pandemic.

Ginsberg and a Cheesecake Factory spokesperson did not return phone calls seeking comment.

“The convertible preferred stock ranks senior to the company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution,” Cheesecake Factory said in a regulatory filing Monday. “Holders will be entitled to dividends on the liquidation preference at the rate of 9.5 percent per annum, payable in cash or, at the option of the company, paid-in-kind.”

Roark founder Neal Aronson said in the statement that the private equity firm’s partnership with the board and management team will help “drive long-term value for all shareholders.” BlackRock, Wellington Management Group and Vanguard Group were among Cheesecake Factory’s biggest shareholders at the end of last year, data on Nasdaq’s website show.

The company’s common stock has plunged in the past the two months. Shares of Cheesecake Factory closed on Monday at $18.93 each, down 55 percent from a February peak of $42.25, according to Nasdaq. 

As a preferred stockholder, Roark has the option to convert its shares into common stock at a price of $22.23 each, according to the regulatory filing. The private equity firm says on its website that it specializes in the restaurant and retail sectors as well as consumer and business services.

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