eBay 101

The restaurant industry could have passed as a five-bout fight card last week. We had franchisor squaring off with franchisee (Krispy Kreme yanking back licensing rights from its biggest operator, Great Circle), big chains continuing to parry the demands of big shareholders (Wendy’s defending its divestiture plan against the hurry-up insistence of hedge funds) and even a bare-knuckled family feud (the clan that owns In ‘N Out Burgers squabbling in court about who should run the cult favorite).

And then there was the War of the Suits, a real puzzler for the news room of Nation’s Restaurant News: A last-minute attempt to snatch control of Fox & Hounds Restaurant Group from the private equity firm that has twice agreed to buy it. That, in these fractious times, would not have been so extraordinary if it wasn’t for a single detail. After the equity company tendered the bid that was accepted by Fox & Hounds’ management, the rival suitor countered with another offer of its own. Yet it was a carbon copy of what the equity firm, Levine Leichtman, had already agreed to pay. The same per-share price, to be paid in a stock buy-up deal, with no advantages or sweeteners spelled out in the announcement. Which, by the way, came after Levine had commenced its open-market purchase of shares.

The party that placed the counter-bid, a consortium of Fox & Hound shareholders Newcastle Partners and Steel Partners, provided no explanation for trying to best Levine Leichtman with an identical offer. Our attempts to deduce the rationale arrived at no conclusions other than a strong conviction that Newcastle and Steel should stay away from eBay.

But there were some intriguing theories about why they proceeded as they did. Is this a way of serving notice to Levine Leichtman that they don’t intend to sell their 8-plus-percent stake in Fox & Hounds for $15.50 a share? Are they giving shareholders in effect a referendum on selling to an equity firm?

Admittedly, there could be financial details yet to emerge that provide the true motivation. But in any case, there could be more rounds to come in this title contest.