March 12--The Levy family has a hankering for $1 tacos.
The Levys, known in Chicago for restaurants such as Spiaggia and concessions at U.S. Cellular Field and Wrigley Field, on Thursday announced plans to buy Del Taco, a Mexican-American chain that got its start in California in 1964.
The acquisition comes after Chicago restaurateur Larry Levy and two of his sons formed Levy Acquisition, a so-called "blank check" company meant to engage in a merger, acquisition or similar deal, in October 2013. Levy Acquisition raised about $150 million when it went public a month later.
"After over a year of searching, we found a company that was in the center of our bull's-eye," Levy said on a call Thursday, referring to Del Taco's "extremely loyal and cultlike following."
Del Taco has nearly 550 restaurants in 16 states, with more than 240 of them in California. The company operates just over 300 stores and franchisees run the rest. Systemwide sales rose 5.4 percent to $656.1 million in 2014, with average volume per store of $1.2 million.
The deal, valued at about $500 million, is a two-step process that should close in June.
First, this month, the Levy family and other partners will invest $120 million in Del Taco, giving them about a 46 percent stake in Del Taco at a $500 million enterprise value. Larry Levy will become chairman of Del Taco. Two of his sons, Ari Levy and Steve Florsheim, will get seats on the Del Taco board. Later, a Levy Acquisition subsidiary will merge into Del Taco. Levy also said that two private investors agreed to buy $35 million of unregistered Levy Acquisition stock for $10 per share.
Once the deal closes, Levy Acquisition will change its name to Del Taco Restaurants. The company will keep trading on the Nasdaq, and Del Taco's current management will keep running the business.
Del Taco positions itself as a mix of quick-service restaurants and fast-casual chains in a category dubbed QSR-plus by President and CEO Paul Murphy, who cited the company's speed and convenience with quality, fresh ingredients.
Del Taco's menu includes "Buck Under" items such as 50-cent mini quesadillas and $1 tacos alongside higher-priced items such as $4 chicken and rice bowls. The company presented information Thursday that shows its tacos, burritos and bowls priced below similar offerings at competitors Taco Bell and Chipotle.
Levy co-founded Levy Restaurants in 1978. The company grew from a single Chicago delicatessen into an international food service company that generates more than $1 billion in annual revenue. Levy sold Levy Restaurants to Compass Group in two stages in 2000 and 2006.
In 2003, he launched Levy Family Partners, a family investment business he runs with Ari Levy and Steve Florsheim. It has made more than 200 investments, mostly in hotels, resorts, real estate and restaurants, including Blaze Pizza and Pollo Campero.
Plans for Chicago area restaurants were not discussed by Levy Acquisition or Del Taco executives on a call Thursday.
In November, Del Taco announced plans to come back to the Chicago area. At that time, franchisee Tasty Group Chicago committed to opening at least eight locations with the first tentatively scheduled to open by July 2016. A Del Taco in Oak Lawn opened in 2007 and closed years ago.
jwohl@tribpub.com
