Atlanta-based Church's Chicken is changing ownership, 4 1/2 years after being bought by Arcapita Bank, a Bahrain-based investment firm with a U.S. office in Atlanta.
Arcapita said Wednesday it has signed an agreement to sell Church's for an undisclosed amount to Friedman Fleischer & Lowe, a San Francisco-based private equity firm. The deal is expected to close within 30 days.
Church's has more than 1,600 outlets worldwide, ranking it third behind KFC and Popeyes among traditional U.S. fried chicken chains. It will continue to be based out of Atlanta, where it has about 80 headquarters employees.
Known for its low prices, Church's has fared well despite the recession. Global systemwide sales rose 5 percent to about $1.2 billion in 2008, the fifth straight year of sales increases.
Senior financing for the deal was provided by a syndicate led by Bank of America, Golub Capital and Wells Fargo. Leveraged buyouts, those requiring significant loans, have dropped in the past year because of the tightened credit mark.
Church's financial performance and a strong management team helped make a deal possible, said Stockton Croft, head of Arcapita's U.S. Corporate Investment Group in Atlanta.
Church's senior managers agreed to roll over their equity, or ownership stakes, in the transaction.
"At the end of the day, what we had here was a unique asset," Croft said.
Terms of the deal were not disclosed but Croft said Arcapita was able to make a significant profit on its investment.
Arcapita acquired Church's in 2004 from AFC Enterprises, the parent company of Popeyes, in a deal valued at $390 million.
Arcapita paid $228 million, with $162 million coming from a sale and leaseback of real estate.
Church's, paired for more than a decade with rival Popeyes, became more competitive under Arcapita. It launched spicy chicken, an area reserved for Popeyes under AFC.
Arcapita also brought in new management. Harsha Agadi, a former Domino's Pizza and Little Caesar's executive, joined Church's as president and CEO shortly after the Arcapita transaction.
Agadi and senior managers will stay after the deal is completed with Friedman Fleischer & Lowe.
"The plan is to continue exactly the way we have," Agadi said.
Church's is on track to open 100 stores this year, the highest mark in 10 years, he said.
The chain could grow more aggressively under the new ownership, Agadi said. He credited Arcapita with putting Church's back on sound footing.
"This brand's strength and growth is very different today than when Arcapita first bought it," Agadi said.
Friedman Fleischer & Lowe said it bought Church's because of its growth potential. The San Francisco firm manages about $2.5 billion with a focus on middle-market companies.
"We are impressed by Church's global footprint, compelling value positioning, history of industry-leading same-stores sales growth, and, of course, the opportunity to further expand domestically and internationally," said David L. Lowe, vice chairman of Friedman Fleischer & Lowe, in a press statement.
Church's Chicken
Headquarters: Atlanta Founded: 1952 Stores: 1,625
Key dates:
1952: George W. Church Sr., a retired chicken incubator salesman, opened his first restaurant in San Antonio. 1969: Church's Fried Chicken became a public company. 1992: America's Favorite Chicken Co., now called AFC Enterprises, bought Church's and moved it to Atlanta. 2004: Arcapita, a Bahrain-based investment firm with a U.S. office in Atlanta, bought Church's. 2009: Friedman Fleischer & Lowe, a San Francisco private equity firm, announces an agreement to buy Church's from Arcapita.
Friedman Fleischer & Lowe
Headquarters: San Francisco Founded: 1998 Money under management: $2.5 billion Portfolio companies: Invested in a range of middle-market companies, including mattress-maker Tempur-Pedic International, Asian food processor and distributor Discovery Foods and Milestone AV Technologies, which designs and makes mounting equipment for LCD projectors and flat-panel displays.
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