Exiting the Public Scene and Becoming Private: The Magnitude of Bid Premiums in the U.S. Restaurant Industry

This article reports the shareholder wealth effects of restaurant firms going private. In addition, this study uncovers firm characteristics that influence the magnitude of the stock bid premiums. This study includes 27 publicly traded restaurant companies that went private between 1995 and 2004. The findings indicate that shareholders of restaurant firms that were taken private enjoyed a highly positive, abnormal return of 26%. Cluster analysis demonstrated that high-premium restaurant firms had higher market-to-book (MB) ratio and cash holdings, lower debt, and market capitalization. A logistic regression model which consisted of cash holdings and debt-to-equity variables successfully classified more than 75% of firms into low and high-premium firms.