It may be a case of Economics 101

April 07, 2008 8:08 PM
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by Ray Poirier | It looks like the directors of Landry’s Restaurants Inc. (LNY) may have learned how costly it can be to procrastinate.

Three months ago, company CEO Tilman Fertitta surprised everyone by offering to buy the company and take it private. The offer of $23.50 per share was some 40% higher than the price shares had traded for on that day.

Fertitta explained that the deal would be all cash for the 61% of the outstanding shares that he didn’t already own.

The response from investors was immediate. The share price zoomed upward to the $19 level but that didn’t last long.

Probably, the shareholders became discouraged when they heard nothing from the board of directors. Sure, they got the usual response that the directors would appoint a special committee to study the offer. That was it.

Time marched on, still nothing from the board.

Then out of the blue, on April 2 the directors announced that its special committee had retained Cowen and Company as its independent financial advisor.

Too late, said Fertitta. Market conditions had changed rapidly since the beginning of the year, he said, so he cut his offer to $21 a share. He also offered a letter from Jefferies & Co. indicating that they were confident Fertitta could finance the deal.

Everyone is still waiting to hear from the directors. Maybe they haven’t learned their lesson yet.