Prime Restaurants, would-be buyer Cara Operations spar over terms of rival bid

MISSISSAUGA, Ont. – The fight for control of the company that owns East Side Mario’s, Casey’s and other restaurant chains has taken a new twist that puts it at odds with the company that owns Harvey’s and Swiss Chalet.

Prime Restaurants Inc. (TSX:EAT) says it’s sticking by the position that its original suitor, Cara Operations, has to at least match a $71-million rival takeover offer from Fairfax Financial Holdings Inc. (TSX:FFH) or walk away.

Prime says Cara – which has until Friday to match any offer deemed to be “superior” to its original $59-million bid – disputes that the Fairfax offer qualifies even though it pays $12-million more in cash.

The basis of Cara’s argument, according to Prime, is a condition that the Fairfax offer doesn’t treat all shareholders equally.

Under the Fairfax proposal, certain current senior executives of Prime would be required to invest in the restaurant company after the takeover.

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Prime says it disagrees with Cara’s position and will accept the Fairfax deal on the table unless Cara exercises its right to match the offer.

Fairfax is offering $7.75 per share for Prime, compared with Cara’s offer of $7 per share. Both offers include 25-cent per share special dividend to Prime shareholders.

In addition to $7.50 per share cash payment, Fairfax would pay approximately $2.2 million to Prime for expenses including a termination free payable to Cara under the original friendly deal between the two restaurant companies.

Cara said at the time of the Oct. 17 announcement that Prime’s restaurants would fit into its own holdings, which include Swiss Chalet, Harvey’s, Milestones, Montana’s Cookhouse and Kelsey’s restaurants.

On the Toronto Stock Exchange, Prime shares were down seven cents at $7.66 Thursday afternoon.