An Horry County judge approved the sale of Hooters at a hearing Thursday, but a legal battle is brewing between two companies seeking to buy the international restaurant chain best known for its "Hooters Girls" waitresses.
Chanticleer Investors LLC is trying to exercise a right to block the sale of Hooters of America Inc. to Wellspring Capital Management. Hooters granted Chanticleer "the right of first refusal" in a previous loan agreement that would give it precedence over any other bidder seeking to buy the company.
A sale to either company is expected to close before Dec. 31, said Jim Creel, one of the estate's five executors, during his testimony.
Thursday's hearing was the latest chapter in efforts to settle the estate of Robert "Bob" Brooks, a Loris native who bought Hooters in 1986 and oversaw an expansion that made the chain a globally recognized brand. Brooks died in 2006 and his will divided his ownership of Hooters, awarding his son and daughter the largest stakes.
The settlement became more complicated when his second wife, Tami Springs Brooks, rejected the will as written and elected to take one-third of the estate's total value, which includes Hooters, an action allowed under S.C. law. She attended the hearing, as did several other family members, but declined to comment.
Chanticleer is a private equity firm based in Charlotte, N.C., and led by chief executive Mike Pruitt, a Coastal Carolina University alumnus. Pruitt was present at the hearing but declined to comment. Chanticleer sent in a request to exercise its right around 12 a.m. Thursday, lawyers said during the proceedings.
Wellspring is a New York-based private equity fund and has previously invested in restaurants such as Dave & Busters and Checkers Drive-In Restaurants.
Wellspring and Chanticleer representatives declined to comment beyond what was said during the proceedings. Pruitt patted Coby Brooks, Bob Brooks' son and current CEO of Hooters, on the back in a brief exchange after the hearing.
The executors and companies working on their behalf began searching for a potential buyer in fall 2009. After two rounds of bidding, executors ultimately chose Wellspring as the best company to buy Hooters.
The purchase agreement, a roughly 850-page document including how much Wellspring would pay for Hooters, has been sealed by the courts. Ken Wingate, attorney for the estate, said that the document was sealed "not only to protect the interest of the beneficiaries but also to protect the company itself."
Horry County Probate Judge Deirdre Edmonds approved the request to sell the company under that agreement, but that ruling does not decide which party will ultimately acquire Hooters. If the right of first refusal is properly exercised, the sale would move forward with Chanticleer as the buyer, said Michael Roh, an attorney for Chanticleer.
Chanticleer had loaned money to Hooters Air, a Myrtle Beach-based airline that failed after three years, in 2006, Creel said in his testimony. The right of first refusal to purchase Brooks' stake in Hooters was included in that agreement, said Creel, who was involved in Hooters Air with Brooks.
Creel testified on behalf of the Hooters board of directors, of which he is a member. Creel was also one of four executors of the estate in attendance. Others were Coby Brooks, son of Bob Brooks; Glenn Brooks, Bob Brooks' brother; and Jim Creel and Carter Wrenn, longtime friends of Bob Brooks. The fifth executor, Edward Greene, president and chief executive officer of Naturally Fresh Inc., which was founded by Bob Brooks, did not attend.
The acquisition agreement between Hooters and Wellspring accounts for the possibility of Chanticleer exercising its right of first refusal, Wingate said.
Two investment bankers also testified: Lorin DeMordaunt, an investment banker with McColl Partners in Charlotte, and Matthew Kelly, an investment banker with North Point Advisors in San Francisco.
Kelly said initially 240 parties were interested in buying Hooters. A pared-down group of 17 potential buyers submitted bids in the first round. Eight of the bidders were included in the final vetting of Hooters and three submitted bids in the second round, Kelly said. Wellspring's bid was ultimately selected, he said.
When asked by Michael Munden, the attorney representing Bob and Tami Brooks' daughter Boni Belle Brooks, whether it was a mistake to sell now in a weak economy rather than holding onto the company and selling later, Kelly said: "I don't have a crystal ball."
The conditions are definitely good and $6 billion in restaurant mergers and acquisitions have been conducted so far this year, Kelly said.
DeMordaunt said they thoroughly marketed Hooters and the estate is getting the best deal.
Chanticleer and Wellspring were not party to the hearing, which was only between executors and beneficiaries of the estate, Edmonds said, but both companies had lawyers present who spoke during the hearing.
At least seven members of Bob Brooks' family attended the hearing Thursday, and most declined to comment with some citing confidentiality agreements of the pending sale.
Glenn Brooks, who was present at the hearing, had contested the initial court ruling that began the process of finding a buyer, according to court documents. Glenn Brooks argued that Tami Brooks' share of the estate was incorrect and overvalued. He also claimed it was improper to sell the company before assessing tax liabilities.
But after Thursday's hearing, Glenn Brooks said he was OK with the sale and voted for it as an executor of the will. Disputes haven't affected family life, he said.
"It's just a process, the family is fine," Glenn Brooks said.
Although Tami and Coby Brooks declined to comment, other family members said the court proceedings has not damaged their relationships.
"We're not squabbling," said Betty Brooks, wife of Gerald Brooks, Bob's brother.
When asked what Bob Brooks would think about the legal proceedings, Betty Brooks said, "He's probably laughing."
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