Well, that still remains to be seen.
But if Landry’s CEO and kingpin Tilman Fertitta has his way, he will purchase his company back from the public where he’ll be free to continue running Landry’s as he always has — like a private empire.
Initial public reaction to the possibility of Landry’s going private is varied.
Some people automatically assume that the falling stock prices which have made a buy-out bid feasible are a result of the Landry’s restaurants being, well, terrible. And whether or not you agree with that, the truth is that people either love or hate the Landry’s ventures — the Kemah Boardwalk, the Downtown Aquarium, the legion Joe’s Crab Shacks littering the landscapes of so many towns like discarded styrofoam cups – but, unfortunately, that sentiment more often than not comes down on the side of love.
I personally dislike most Landry’s restaurants. But a large percentage of people — whether out of a lack of taste or a lack of motivation to seek out better food — like them. It’s true. Your Average Joe likes the Cadillac Bar. He likes taking his kids to Rainforest Cafe. He likes eating lukewarm, low-quality seafood underneath giant plastic tubes with fish half-heartedly swimming inside of them.
So I don’t believe that it’s a lack of interest in the many Landry’s enterprises that has driven the stock down 50% over the past year. There is another theory to which I tend to give more credence. As one commenter on Loren Steffy’s story in the Chronicle put it:
Hmmm, make the stock price decrease over the year and then buy it for yourself and then make a profit…what a racket….
Before you hand me my tin foil hat, ask yourself if that really seems so improbable. Short selling is a long-practiced method of obtaining stocks and/or companies at a lower price after a market freefall. Who’s to say it hasn’t been used here?
Because this is technically a blog about food and not about the financial market, I’ll take a second to explain the market practices of short selling and Short and Distort…
Short selling is a practice used to artificially drive down the price of a company’s stock, so that one can repurchase the shares at a lower price and turn a mean profit. It has been around for almost a century and was one of the chief causes of the Stock Market Crash in 1929. Short selling’s cousin, the Short and Distort, was born right here in Houston during the Enron scandal. The Short and Distort is a much dirtier practice, involving a campaign to deeply tarnish a company’s public image and using the ensuing fallout to lower the stock price until it hits a profitable amount for the short sellers to buy back.
Now, the question is: could Fertitta have been artificially lowering Landry’s stock price (indirectly or not) over the past year in order to bring the company down to a purchaseable position? Some might ask what the point of such an exercise would be, especially in light of the fact that he’s offering to buy the stock at a hefty premium (40% as of last Friday’s closing price of $16.67 per share) and assume a large amount of debt.
There’s the obvious answer that Fertitta has made the $1.3 billion offer to, as Steffy notes, “thwart any rival bids.” And then there’s the answer lying beneath the surface: that $1.3 billion is worth it to Feritta in order to have complete control over Landry’s and no longer have to answer to shareholders or stock markets. Whether or not he makes a profit in the short-term makes no difference; it’s the control that’s in play here.
I’ve made it clear in the past that aside from disliking Landry’s restaurants, I also strongly disagree with their business practices. And I am definitely not alone in this position.
Tilman Fertitta’s family, the famous Maceo brothers of Galveston, were deeply rooted in corrupt business practices during Galveston’s post-hurricane heyday throughout the 1920s and 1930s. Sam and Rose Maceo, Fertitta’s great-grand uncles, were involved in bootlegging, drug trafficking and illegal gambling as well as running some of Galveston’s greatest entertainment attractions of the time, such as the famed Balinese Room (which, in an interesting footnote of history, was originally named The Grotto, a same name shared by the landmark Houston restaurant which Fertitta purchased some years back).
Sam and Rose Maceo and their “Junior Maceos” — Anthony J. Fertitta, Frank J. Fertitta Sr, Victor J. Fertitta, Sam T. Maceo, Vic A. Maceo and Lorenzo Grilliette — controlled the entertainment industry on Galveston Island for the better part of the early 20th century. Their influence and wealth brought some of the era’s greatest performers to Galveston: Duke Ellington, Tony Bennet, Frank Sinatra, just to name a few. Their empire eventually expanded into Las Vegas, culminating in the opening of the Desert Inn Hotel and Casino, the fifth hotel/casino to open on the Las Vegas Strip.
Tilman Fertitta’s business ventures have paralleled his family’s previous undertakings in several striking ways: the costly business interests he has in Galveston; the quiet attempts to bring gambling and casinos to the island; the numerous restaurants and entertainment venues created from nothing; and his aggressive entrance into the heady Las Vegas hotel and casino market. His business tactics, however, are more closely guarded, although they should be subject to just as much scrutiny as his profiteering uncles’.
Could it be that — like his family — Fertitta is interested solely in running his business the way that he wants to, as an empire, without answering to any outside sources, whether they be the SEC, his shareholders or the public? And that he is willing to undertake any means necessary to achieve this goal?
Will Landry’s go private? Probably. But the more intriguing question is: how?