Friday, September 15, 2006

Deutsche Bank May Vote Against Lone Star Steakhouse (STAR) Merger

In a 13D filing on Lone Star Steakhouse & Saloon Inc. (Nasdaq: STAR) Deutsche Bank AG discloses a 9.8% stake (2.1 million shares) in the company. This is up from the 1.6 million share stake the firm disclosed in a quarterly filing with regulators. In the filing, Deutsche Bank said it may decide to vote against the proposed merger with Lone Star Funds.

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, another large Lone Star holder, Barington Capital, said the merger fails to provide adequate value to the Company's stockholders. Barington represents a group of investors that owns, in the aggregate, approximately 9.4% of the outstanding common stock of the Company.

Shares of Lone Star closed at $27.81 per share on Thursday, above the $27.10 offer price.

From the Purpose of Transaction section of the filing:

"The Issuer entered into an Agreement and Plan of Merger, dated as of August 18, 2006, by and among the Issuer, Lone Star U.S. Acquisitions LLC and COI Acquisition Corp.(the "Merger Agreement"). Although no definitive determination has yet been made, the Reporting Person may decide to vote against the transactions contemplated by the Merger Agreement and may seek appraisal of the fair value of its Shares. Moreover, the Reporting Person may, subject to compliance with applicable law, communicate with third parties or the Issuer's management and stockholders regarding one or more of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D."

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