Friday, September 22, 2006

Another Large Lone Star (STAR) Holder Against Merger with Lone Star Funds

In a 13D filing on Lone Star Steakhouse & Saloon Inc. (Nasdaq: STAR), Millenco, L.P. disclosed a 5% stake (1.07 million shares) in the company. In the filing, Millenco said it may decide to vote against the proposed merger with Lone Star Funds.

The investment firm said, "We believe that purchase price set forth in the Merger Agreement significantly undervalues the assets, including, but not limited to, the real estate assets, and the business, of the Issuer. In addition, we believe that the sales process conducted for the sale of the Issuer was flawed in numerous respects and helped contribute to the low purchase price."

On August 18th, Lone Star signed a definitive agreement to be acquired by affiliates of Lone Star Funds, a Dallas-based private equity firm, for $27.10 per share in cash.

Recently, other large Lone Star holders, Barington Capital and Deutsche Bank AG, said they are against the merger. Barington represents a group of investors that owns about 9.4% of the outstanding common stock of the Company and Deutsche Bank AG owns 9.8%.

Shares of Lone Star are currently trading at $27.40, slightly above the $27.10 offer price.

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