For several years, I've kept a list of companies that I'd like to see go public. None of them probably ever will, but I am nonetheless curious about how their financials might look as well as how they would perform in the markets.
As a 17-year Bloomberg veteran, that company was always at the top of the list. There were several times during my tenure there that the rumors swirled about an impending IPO, but it never happened, and probably never will. Other companies that are on my list include fast-food company Chick-fil-A, specialty grocery store chain Trader Joe's, famous for providing Charles Shaw wines (a.k.a. "Two Buck Chuck"), and California fast-food staple In-N-Out Burger.
There's an additional restaurant chain, for which I might be granted my wish, although not in the traditional sense. Quaker Steak & Lube is a 54-store chain specializing in chicken wings. Founded in 1974 in Sharon, Pa., the original location, a hole in the wall at the time, was a college stomping ground of mine. It's also where my 30-year addiction to wings began, and you could get a full bucket of wings for $9.99. Since then, wings have become somewhat of a national craze, with chains such as Buffalo Wild Wings (BWLD) gaining traction. In fact, "wing-flation" has set in; good luck finding a full bucket of wings these days for under 30 bucks. Even if you could, it would not be as full as the $9.99 buckets of my youth.
After being a stand-alone for many years, Quaker Steak & Lube began franchising in 1997, and now has locations in 16 states, most concentrated in Pennsylvania (13 locations) and Ohio (17). However, even the seemingly best concepts can easily run into trouble in the restaurant business, and in November, the company filed for bankruptcy.
Enter TravelCenters of America (TA), a name that may be familiar to value investors, which agreed to acquire the company for $25 million. True to its name, TravelCenters operates highway-based restaurants, convenience stores and fueling stops in 43 states. The company has been actively expanding via acquisition, and Quaker Steak & Lube is set to be one of the latest additions. The deal has not yet closed, and must be approved by the courts, but I expect we'll hear more when TA releases earnings
There are a couple of reasons TA continues to show up on value-related stock screens. First, it trades at 5x trailing earnings, and 9x 2016 consensus estimates. Second, it trades at just 0.65x tangible book value per share. At the end of the latest quarter, the company had nearly $6 per share in cash. There is considerable debt, to the tune of about $650 million, but in turn, considerable real estate assets.
If the deal for Quaker Steak does materialize, I may finally get a peek at the chain's finances, which, given the bankruptcy, were not good. Time will tell if TA can turn the brand around and expand it, as the company has stated it intends to do.
To my fellow Real Money contributors, are there any companies you'd like to see public? Please post in Columnist Conversation.