 991216 McDonald's to Buy Boston MarketDecember 1, 1999 Chicago - Fast-food giant McDonald's Corp., looking to spread its domestic wings, announced that it has agreed to buy the assets of once high-flying but now struggling restaurant chain Boston Market. McDonald's plans to buy 751 restaurants and acquire franchise rights for 108 more under the deal, which would be part of Boston Market parent company Boston Chicken Inc.'s Chapter 11 bankruptcy reorganization. For Oak Brook, Illinois-based McDonald's, the world's largest restaurant chain, the move is a part of its plan to grow its domestic business without hurting its core hamburger restaurants. McDonald's bought Columbus, Ohio-based Donatos Pizza in May and purchased a minority stake in Denver, Colorado-based Chipotle Mexican Grill in April 1998. A McDonald's spokesman said some of the restaurants would be converted to McDonald's, Chipotle or Donatos brands, while others would continue as Boston Market sites when the transaction closes in mid-2000. The conversion to other McDonald's brands will be done on a site-by-site basis, and was expected to be completed in two to three years, Michael Conley, McDonald's chief financial officer, told analysts on a conference call. Boston Market specializes in homestyle entrees such as chicken and meat loaf, fresh vegetables, sandwiches, salads and side dishes. The company said Boston Chicken's majority stake in Einstein/Noah Bagel Corp.is not part of the purchase agreement. "I think that the point is, with this one acquisition, we are getting a lot of real estate that will help jump-start Donatos Pizza and Chipotle," Jack Greenberg, chairman and chief executive of McDonald's, said in an interview. "So we have good sites for McDonald's, and we also have a viable business (Boston Market) that we can see how we'll develop and grow." Boston Chicken was a darling of Wall Street after its initial public offering in 1993 when its stock soared from the pricing of $20 a share to a high on that day of $50. But quick expansion into new markets, such as price- competitive lunches, took its toll on the company, which eventually finally filed for bankruptcy protection last year. Under the deal, McDonald's subsidiary Golden Restaurant Operations Inc. will acquire the assets, including the restaurants, franchise rights and some debt. The $173.5 million price includes both cash and the assumption of certain related liabilities. "It's certainly along the lines of them branching out," said Patrick Schumann, a restaurant and food industry analyst for Edward Jones. "They're not paying a whole lot for assets that we believe were attractive -- the (Boston Market) system was not well run." Golden, Colorado-based Boston Chicken expects to file its reorganization plan this month. McDonald's said the senior secured creditors of Boston Chicken, subject to government and bankruptcy court approvals, have accepted the bid. In June, Boston Chicken said it was seeking a buyer. Boston Chicken has more than $900 million in debt obligations in bankruptcy and has said that its shareholders will retain no value under a reorganization plan. The company also expects its bond holders will not retain any value under the plan, and Boston Chicken's equity and debt securities will be canceled upon plan confirmation, it said. McDonald's will take over operation of the Boston Market restaurants when the deal is closed. Until then, Michael Jenkins will remain in his role as chief executive officer of Boston Chicken. Boston Market restaurants are located in 33 states and the District of Columbia, with the majority of sites in the Eastern and Midwestern United States. McDonald's has more than 25,000 restaurants serving more than 40 million customers a day in 118 countries.
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