Friday, November 17, 2006

Lone Star (STAR)/Barington Capital Fight Wages On Ahead of Shareholder Vote on Merger

With just two weeks to go before shareholders vote on the $27.10 per share acquisition of Lone Star Steakhouse (Nasdaq: STAR) by private equity firm Lone Star Funds, dissident shareholder Barington Capital and the company continue to fight.

In an letter made public in an amended 13D filing on Thursday, Barington Capital said a financial advisor they engaged, Compass Advisers, has identified five parties that may be interested in purchasing the Company at a price higher than $27.10 per share if they are given the opportunity to review the Company’s non-public information without the requirement of having to first submit an acquisition proposal.

In a response to the the letter, Lone Star Steakhouse said they found the claims made by the firm "disingenuous and oddly timed". The company said a potential buyer does not have to submit a binding offer, making it easier than many comparable transactions. The company questioned if the "allegedly interested parties" were truly serious about a transaction.

In response to the response, Barington Capital reiterated their stance that the company was not maximizing value under the current merger agreement and said they will vote against the merger.

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