FAT Brands Up on Plan to Merge Into Parent Fog Cutter

Fog Cutter Capital, which controls FAT Brands, operator of Fatburger and Johnny Rockets restaurants, is merging with FAT.
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FAT Brands  (FAT) - Get Report shares jumped on Friday after the restaurant company said it’s merging with its controlling shareholder, investment firm Fog Cutter Capital.

Terms weren’t disclosed. 

FAT (Fresh Authentic Tasty) owns nine restaurant brands, including Fatburger, Johnny Rockets and Buffalo’s Café. It has more than 675 franchises worldwide.

FAT shares recently traded at $9.50, up 54%. The stock had risen 36% in 2020 through the close of Thursday trading.

“The merger is intended to provide FAT Brands with increased financial flexibility and simplified corporate structure, at a time in the restaurant industry when committed capital and first-mover advantage are critical to strategic acquisitions,” the company said in a statement.

“As we have disclosed in the past, FAT Brands has considered a combination with Fog Cutter as another step in our efforts to simplify our corporate structure and eliminate limitations that restrict our ability to use common stock for accretive acquisitions and capital raising,” FAT Chief Executive Andy Wiederhorn said in a statement.

“Fog Cutter holds more than $100 million of net operating loss carry-forwards, which could only be made available to FAT Brands as long as FCCG owned at least 80% of FAT Brands. With this combination, the NOLs will be internalized at FAT Brands, and we will now have much greater flexibility and optionality in our capital structure.”

Further, “we believe that the steps we have taken in 2020 will position us to capitalize on organic and acquisition-led growth in the future,” Wiederhorn said. 

“We look forward to 2021, when we hope to experience some normalization as the pandemic subsides. … We continue to anticipate that the company can generate twice our 2019 Ebitda of $7.7 million.”

Wiederhorn has faced legal difficulties in the past, reportedly spending 16 months in jail in 2004-2005.