Clearwater, FL - Drive-through hamburger chains Rally's Hamburgers Inc. and Checkers Drive-In Restaurants Inc. said they would merge in a stock swap, almost a year after combining their management teams.
Under the deal, set to close in the second quarter, each Rally's share will be swapped for 1.99 shares of Checkers.
The Checkers stock that Rally's owns -- about a 26 percent stake -- will be retired following the merger.
Also, Checkers will execute a one-for-12 reverse stock split to reduce the number of outstanding shares. As of the third quarter, Checkers had 73.4 million shares outstanding.
“The wisdom of this merger both operationally and financially has been evident for some time,” William Foley, chairman, said in a prepared statement.
“It will allow the companies to complete the expense-reduction program they began last year by continuing to combine administrative and operational functions without the competitive concerns which exist as long as Checkers and Rally's are separate public companies,” he said.
The merger is expected to boost earnings per share and raise the trading price of shares on the Nasdaq stock market, Jay Gillespie, chief executive, said.
Checkers shares closing Thursday just above 50 cents, and Rally's at $1.06.
Rally's and Checkers said they will release year-end financial results in the next two weeks posting losses for the fourth quarter and full year.
Checkers said its sales for the year increased 2.3 percent from 1997. Rally's said its comparable-store sales fell 1.8 percent for fiscal 1998.
The companies combined their managements into the Clearwater, Fla., corporate offices about a year ago. Those executives will remain the same, with Foley continuing as chairman and Gillespie as president and CEO.
The merger must be approved by shareholders of both companies.
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