RESTAURANT—Buyback Nearly Done, Jerry’s Returns to Private Hands

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Sporting a stock that’s 80 percent below its levels of the mid-1990s, Jerry’s Famous Deli is nearing the end of a buyback aimed at taking the company private.

“We always felt that the value of our shares was much lower than what we felt was the actual value of the company,” said Christine Sterling, Jerry’s chief financial officer.

By Oct. 10, the company had bought back all but roughly 80,000 of its outstanding shares and, at a share price of $5.15, was delisted by the Nasdaq for failing to meet the minimum required float of $2.5 million for trading on the exchange.

Since September, the company has purchased 719,325 of 4.7 million outstanding shares for $5.30 a share. Company co-founder Isaac Starkman and his family control roughly 2.25 million shares. Investor Ronald Burkle and associated entities controlled about 1 million shares, according to documents filed with the Securities and Exchange Commission.

Sterling would not say when the company would buy the remaining outstanding shares, but noted that going private would give it a chance to enhance its overall value. The company, she said, is more likely to attract capital if it removes itself from the sometimes-volatile stock market.

Jerry’s stock has remained in the $5 range for several months. Before it was delisted on Oct. 10, Jerry’s was trading at $5.10, with a 52-week high of $5.34 and a 52-week low of $1.16.

Doug Christopher, an analyst with Crowell, Weedon & Co., said the move is a response to the slowing economy and its own struggle to maintain market share in a competitive restaurant market.

“They probably feel that they’ll have better control of the company and possibly enhance its value. But it’s more a reflection of the overall bad economy,” he said.

But while a 1995 initial public offering allowed the company to expand and increase revenues by nearly 70 percent in two years its stock has performed poorly over the years and has attracted little interest.

Moreover, despite a slight jump in revenue in 1999 $70.8 million compared with $66.6 million in 1998 figures for this year are only slightly ahead of last year.

Jerry’s reported net income of $242,147 (5 cents per diluted share) for the second quarter ended June 30, compared with $79,706 (2 cents) for the like period a year ago. Second quarter revenues were $16.6 million, vs. net income of $16.3 million.

Christopher said the company’s numbers underscore the crowded and competitive restaurant business where much bigger chains have the advantage. Comparing Jerry’s to national chains like Blimpie and Subway, he said, “A lot of people are not going to spend 10 bucks on a sandwich anymore, and that’s what it comes down to.”

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