MONTREAL – Prime Restaurants Inc. shares surged more than 10 per cent Monday after investment giant Fairfax Financial Holdings Ltd. served up a $71-million offer for the company that operates such eateries as East Side Mario’s, Casey’s and D’Arcy McGee’s.
Prime (TSX:EAT) set a new 52-week high in gaining 70 cents to $7.63 a share in morning trading Monday on the Toronto Stock Exchange.
The Toronto-base company said it solicited the offer from Fairfax under a provision of its agreement with Cara, which offered last month to pay $59 million for the company.
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.
Under its agreement with Prime, Cara now has five business days to submit another bid or back away and receive a termination fee.
“Cara is examining the acquisition proposal from Fairfax and will evaluate Cara’s alternatives under the provisions of the acquisition agreement,” the company said Monday after receiving Prime’s notification.
Cara declined to provide additional comments about the potential for a revised bid now that Fairfax has stepped in.
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Fairfax (TSX:FFH) is offering $7.75 per share for Prime, compared with Cara’s offer of $7 per share.
Both bids include a 25-cent special dividend that would be paid by Prime to its shareholders, with the remainder of the bid prices coming from the buyers.
Toronto-based Fairfax is primarily an insurance holding company but it also invests in other industries upon occasion.
For instance, it acquired a 19.7 per cent stake in a Montreal-based toy maker about a year ago as part of a recapitalization of Mega Brands Inc. (TSX:MB).
Prior to that, Fairfax invested in the former Canwest newspaper and television group, before the media company was dismantled and sold under court protection from creditors.
Mark Dwelle of RBC Capital Markets said Fairfax likely sees a good investment opportunity in Prime, which would represent a fraction of its $22-billion asset portfolio.
The Virginia-based analyst said Fairfax has a history of entering into friendly transactions instead of bidding wars.