A private equity firm could close a deal to buy Hooters - the restaurant chain known for its risque waitresses and hot wings - and end family disputes over the deceased CEO's estate after a hearing in Horry County today, according to court documents.
A judge is expected to approve the sale of Hooters of America Inc. to Wellspring Capital Management, a private equity company based in New York, at a hearing in Horry County Probate Court this morning.
The hearing is the latest legal step toward settling the estate of the late Robert "Bob" Brooks, a Loris native who bought Hooters in 1986 and oversaw an expansion that made the chain a globally recognized brand. Brooks died of natural causes in 2006 in his Myrtle Beach home.
The details of the acquisition agreement, including how much Wellspring will pay and whether any Brooks family members will retain part ownership, have been sealed by the court.
The sale could sever longtime ownership ties that the chain has had to the area. But it also could help heal rifts in the family caused by disputes over the estate.
Bob Brooks divided his ownership of Hooters among his family members and Clemson University in his will. The division was complicated when Bob Brooks' wife, Tami Springs Brooks, elected to take one-third of the total value of the estate, including Hooters, an action allowed under S.C. law that supersedes what is written in the will.
Brooks left only about 1 percent of ownership in Hooters to his wife in the will. The largest stakes in the company went to Brooks' son and daughter.
The family has agreed to sell the company as part of settling Brooks' estate, subject to the approval of a judge, according to court filings.
"We are expecting that things should be wrapped up pretty quickly after the hearing," said Melody Breeden, an attorney representing Tami Brooks. Breeden said she had to clarify with a judge what she was legally allowed to say before commenting further.
Coby Brooks, chief executive of Hooters of America and Bob Brooks' son, and Hooters' media relations staff did not respond to multiple phone messages this week.
Tami Brooks declined to comment when contacted at her home.
Wellspring is a private firm that manages more than $3 billion in assets and whose past acquisitions include the Dave & Buster's restaurant chain.
"We can't discuss it because nothing has been finalized," said Taylor Yoo, director of investor relations and marketing at Wellspring, when asked about the Hooters acquisition.
A family affair
Brooks founded a food company in Atlanta in 1966 that would later become Naturally Fresh Inc. He went on to buy Hooters in 1986 and led an expansion that opened more than 400 restaurants - both wholly owned locations and franchises - in the U.S. and internationally. He also oversaw the NGA Hooters Golf Pro Tour and Hooters Air, a Myrtle Beach-based commercial air carrier that ended after an ill-fated three years in operation.
In his will, Brooks left roughly 40 percent of his Hooters shares to Coby Brooks, his son from a previous marriage, and another 40 percent to Bob and Tami's daughter, a minor who was born in 1999. He left roughly 13 percent of his shares to Clemson University to fund a sports institute.
Brooks left Tami Brooks his house, personal effects and $20 million. He gave her roughly 1 percent ownership in Hooters in exchange for maintaining the cemetery where he is buried, court documents say. Six other relatives were also given about 1 percent for cemetery upkeep.
Rather than accepting the will as written, Tami Brooks made use of South Carolina's "elective share" law for surviving spouses.
That share entitles her to one-third of the probate estate, which excludes certain assets such as life insurance, said Brant Hellwig, a law professor at University of South Carolina.
"Even if you intend to disinherit your spouse, that's not relevant to the elective share," Hellwig said.
The share would include what Tami Brooks was left in the will plus probate assets that give her a total of one-third of the estate.
When including the value of Hooters, one-third of the estate would be far more than what Tami Brooks was originally left in the will. Hooters has about $1 billion in annual sales, according to estimates by consulting firm Technomic. The private firm does not have to disclose its sales data.
The five executors - Coby Brooks; Edward Greene, president and chief operating officer of Naturally Fresh Inc.; James Creel and Carter Wrenn, longtime friends and local businessmen; and Glenn Brooks, Bob Brooks' brother - had challenged Tami Brooks' claim to the estate.
Greene, Creel, Wrenn and Glenn Brooks either declined to comment or did not respond to phone messages this week.
The group challenged the "elective share" law, alleging it went against the equal protection granted in the U.S. Constitution, but courts upheld the law.
The executors also disputed that Tami and Bob Brooks were "living together as husband and wife" at the time of his death, a requirement to receive her inheritance in the will. That claim was dropped in an agreement between the executors and those named in the will in October 2009.
The same agreement set Hooters on a path to be sold, stipulating a timetable to seek out interested companies.
Selling the company
Each person receiving a stake in Hooters stands to get a higher return if they sell as a group, Hellwig said. Valuing interests in privately held corporations is always contentious, and the sale may help resolve what the company's value is, he said.
Ken Wingate, lead probate attorney for the estate, said he couldn't comment on the time frame of the Hooters acquisition because the agreement is sealed and he did not know how long the overall estate would take to settle.
"That is unclear. It's a complicated estate, so there could be various things that need to be resolved," Wingate said.
The Brooks estate will probably make less money by selling Hooters of America now than if it had sold two years ago because of the weak economy, said Darren Tristano, an executive vice president at Technomic, which tracks Hooters.
But there are many companies willing to buy such a chain in the current market and at least the estate won't risk getting stuck with a declining firm, he said.
"If it's an estate, estates always tend to have people who want to get out. And if it's a high-value asset, people are generally happy to get what they can get," Tristano said
The chain has stagnated as numerous competitors that also sell wings have emerged, Tristano said. The company's growth has mostly been international, he said, where the chain is estimated to have about 50 locations.
New owners could reinvigorate the company, he said.
"The actual model may be becoming a bit tired, and it may be time to reimage," Tristano said.
The chain could venture into fast-casual style restaurants, a middle ground between full-service restaurants and fast food, or improve its takeout business, he said
The sale will likely mean Coby Brooks would step down as CEO or accept a smaller role in the company, as typically happens when a company is bought out by a private equity firm, Tristano said. Wellspring will likely install its own CEO, Tristano said.
As the economy improves, Wellspring may see more profit in operating the Hooters chain rather than flipping it for a quick profit, Tristano said.
Wellspring's track record with restaurants includes buying the Dave & Buster's chain in 2006 and selling it for $570 million earlier this year.
Regardless of who manages the chain in the future, it is "very unlikely with the strength of the Hooters brand that it would go away," Tristano said.
Contact JAKE SPRING at 626-0310.