Lone Star Steakhouse & Saloon Inc. (NDAQ:STAR) is facing pressure again from Barington and other shareholders who are demanding that the company take the time to revalue the company before any definitive transaction is announced. These shareholders have stated on multiple occasions that they believe the buyout premium put forth by a Dallas private equity group seeking to buy the company is simply not enough. The Board, however, has remained silent on the issue prompting Barington to send yet another letter (in a 13D/A filing today) in which they stated:

"We question the judgment of the Board in approving the transaction without having first obtained an appraisal of the real estate holdings of the Company. We estimate that the value of the Company’s extensive real estate assets (including land and buildings) exceeds $400 million and believe that it is misleading for the Company to disclose on page 28 of the Proxy Statement that the actual market value of the Company’s owned real estate holdings could be 'higher or lower' than such assets’ net book value of approximately $245 million. We also note that neither of the two financial advisors that opined as to the fairness of the proposed transaction made an independent appraisal or valuation of the Company’s real estate holdings or were furnished with an appraisal of such assets (as disclosed on pages 30 and 36 of the Proxy Statement), causing us to question the ultimate utility of the fairness opinions that have been rendered.

Furthermore, we question the thoroughness of the sale process, including the decision of the executive committee of the Board to only conduct a 'targeted' market check of six potential purchasers, as opposed to a more thorough assessment of interest from a broad range of potential financial and strategic buyers. We also question the effectiveness of this 'targeted' marketing process when the six potential purchasers were given less than a month’s time to review non-public information concerning the Company. It is our belief that it is unreasonable to expect a potential purchaser to complete its due diligence review of the Company in such a short time period ... It is therefore no surprise to us that once these potential purchasers had the sale process abruptly shut down on them in March 2006, none of them had an interest in further pursuing a transaction with the Company when contacted again in August 2006.

In light of the sale process that was conducted by the Board and the modest merger consideration being offered, please be advised that it is our intention to vote against the merger and that we may seek appraisal rights in connection with the transaction." (Read More)

This comes about a month after the hedge fund sent its first demands to the company back in September. So far, both Barington and Deutsche Bank have expressed their dissatisfaction with the company's sale process. Combined these two hold about 20% of the company's outstanding shares and they both plan to vote against the transaction unless their demands are met. If the two are able to convince other shareholders to vote similarly, it could put a significant road block in the way of STAR's planned merger.

Related Companies
Brinker International, Inc. (EAT)
Ryan's Restaurant Group (RYAN)
Texas Roadhouse Inc. (TXRH)