April 4, 2008 / 10:16 PM / 9 years ago

UPDATE 2-Landry's CEO cuts offer for company to $21/shr

3 IN. DI LETTURA

(Adds CFO comments, background, details; updates share movement)

By Dhanya Skariachan

BANGALORE, April 4 (Reuters) - Landry's Restaurants LNY.N CEO Tilman Fertitta cut his offer to buy the company by about 11 percent to $21 a share as rising credit woes squeeze financing options for a possible $1.3 billion deal.

Shares of the restaurant-chain operator rose as much as 27 percent to $19.57, but fell back to close at $17.91 Friday, well below Fertitta's offer price, indicating the proposed deal may not come to fruition.

The revised offer, which is about 37 percent higher than the stock's Thursday closing price of $15.30 on the New York Stock Exchange, values the stock at almost 14 times forward earnings.

Landry's stock, which had fallen 25 percent since news of the initial offer before Friday's gains, trades at about 12 times forward earnings. The Restaurants sector trades at a multiple of more than 19.

"Fertitta's new offer reflects the realities of the marketplace," CFO Richard Liem told Reuters from Houston. But he declined to comment on what would be a good offer for the company.

Landry's, which has appointed a special committee of independent directors to review Fertitta's offer, said it has not received any other proposals.

Fertitta, who has been with the company for more than two decades and currently owns about 39 percent of Landry's, said he has a letter from Jefferies & Co indicating that the investment bank was "highly confident" in its ability to get the debt financing for the deal.

The total deal value of about $1.3 billion includes CEO Fertitta's stake in the company as well as additional substantial cash equity.

In a letter to the company's board, Fertitta said since January, when he made his initial offer, credit market conditions have significantly worsened, making it far more costly to obtain the debt financing required for the deal.

Fertitta could not be immediately reached for comment.

Houston, Texas-based Landry's Restaurants operates the iconic Golden Nugget Hotel & Casino in Las Vegas and several casual-dining outlets, including Landry's Seafood House.

The company competes with Texas Roadhouse (TXRH.O), CBRL Group Inc (CBRL.O), and larger rivals IHOP Corp IHP.N and Darden Restaurants (DRI.N).

Fertitta's cousins, Frank and Lorenzo Fertitta, took Las Vegas casino operator Station Casinos private in a management-led buyout last year. (Editing by Pratish Narayanan)

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