Denny’s Parent Agrees to Buyout by Coniston After Long Fight

After resisting a nine-month takeover assault, the owner of Denny’s coffee shops on Wednesday agreed to be acquired by a New York investment firm in a deal valued at $1.65 billion.

TW Services, which also owns El Pollo Loco restaurants and 42% of Winchell’s Donut Houses, agreed to a sweetened $34-a-share cash offer from Coniston Partners. Coniston, which already owns 19% of TW stock, had boosted its offer from $29 a share.

“It’s a big relief not only for me but for over 100,000 employees,” said TW president Jerome J. Richardson Jr., the probable replacement for chairman Frank L. Salizzoni, who is expected to leave. “We know what the next step will be and now we can get on with running the business.”

Gus Oliver, general partner for Coniston, said: “We were determined from the beginning to do our best to own the company. Of course, we would have certainly preferred to have done it in a shorter period of time. The process was frustrating at times.”

On the New York Stock Exchange, TW shares rose 25 cents to close at $33. It was the fourth most heavily traded stock, with 4.5 million shares changing hands.

Oliver said Coniston intends to sell TW’s nursing home and retirement center division, which accounted for about 5% of the company’s $3.6 billion in 1988 revenue. Also, some minor parts of Canteen--the company’s food service division, which contributed 42% of total revenue--will be put up for sale.

However, no major changes or layoffs are planned for Irvine-based Denny’s, the nation’s largest coffee shop chain with about 1,200 units, or its fast-growing El Pollo Loco restaurants. Coniston also will keep the more than 400 Hardee’s fast-food outlets that TW operates as a franchisee.

“We intend to keep the company’s core business pretty much intact and work to build those businesses over time,” Oliver said.

TW, which posted profits of $66.9 million in 1988, had acquired the two restaurant chains and its interest in Winchell’s nearly two years ago.

Under TW, Denny’s has undergone major changes. About 25% of its corporate staff was laid off and its former corporate headquarters in La Mirada was sold. TW also planned to spend $25 million to $30 million annually over the next five years to remodel the chain.

In fighting the takeover, TW claimed that the acquisition would leave the company saddled with debt and hinder expansion plans. Spending will be cut as a result of the takeover, said Richardson, but such cuts “would be reasonable.”

Coniston said it intends to finance the takeover through a leveraged buyout in which cash generated by the company is pledged to pay off interest and loans.

The lengthy takeover battle, which began in October, 1988, after Coniston made an initial $28-a-share offer, spilled into the courtroom when the investment group challenged TW’s anti-takeover defense. A Delaware court ultimately upheld the defense, but Coniston continued its pursuit of the company.

In March, with 90% of its stockholders already agreeing to sell their shares to Coniston, TW put itself up for sale. But after the company closed the bidding Monday, Coniston emerged victorious. Neither company would reveal the identities of other bidders.

Under the agreement, Coniston’s $34-a-share offer will expire on July 5. Afterward, shareholders will have the option of trading each share for $30 in cash and stock in the surviving company or $34 in cash.

The victory was a boost for Coniston’s prestige. Industry analysts had been skeptical of the group’s chances after it failed to win a fight to force a sale of Gillette Co. in 1988. Gillette later agreed to a buy a portion of its stock back.

In 1987, Coniston helped trigger the reorganization of Allegis Corp., which was renamed UAL Inc., by acquiring a large stake and threatening to take over the company.