SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
Under the Securities Exchange Act of 1934
(Amendment No. )*
Carrols Restaurant Group, Inc.
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(Name of Issuer)
Common Stock, $0.01 par value
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(Title of Class of Securities)
14574X104
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(CUSIP Number)
Marc Weingarten, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 30, 2007
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(Date of Event which Requires
Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other parties
to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 13 Pages)
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* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 2 OF 13 PAGES
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
CLINTON GROUP, INC.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7 SOLE VOTING POWER
-0-
----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,124,561
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH -0-
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,124,561
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,124,561
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.2%
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14 TYPE OF REPORTING PERSON*
IA; CO
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* SEE INSTRUCTIONS
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 3 OF 13 PAGES
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
CLINTON MULTISTRATEGY MASTER FUND, LTD.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
CAYMAN ISLANDS
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7 SOLE VOTING POWER
-0-
----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 939,989
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH -0-
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
939,989
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
939,989
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.4%
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14 TYPE OF REPORTING PERSON*
CO
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* SEE INSTRUCTIONS
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 4 OF 13 PAGES
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
CAYMAN ISLANDS
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7 SOLE VOTING POWER
-0-
----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 119,159
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH -0-
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
119,159
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
119,159
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.5%
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14 TYPE OF REPORTING PERSON*
CO
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* SEE INSTRUCTIONS
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 5 OF 13 PAGES
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
CLINTON LEXINGTON MASTER FUND, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
CAYMAN ISLANDS
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7 SOLE VOTING POWER
-0-
----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 65,413
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH -0-
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
65,413
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
65,413
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.3%
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14 TYPE OF REPORTING PERSON*
PN
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* SEE INSTRUCTIONS
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 6 OF 13 PAGES
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
GEORGE HALL
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
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7 SOLE VOTING POWER
15,200
----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,124,561
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 15,200
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,124,561
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,139,761
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.3%
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14 TYPE OF REPORTING PERSON*
IN
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* SEE INSTRUCTIONS
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 7 OF 13 PAGES
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ITEM 1. SECURITY AND ISSUER.
This statement relates to the shares of Common Stock, $0.01 par value
per share (the "Shares"), of Carrols Restaurant Group, Inc., a Delaware
corporation (the "Issuer"). The principal executive office of the Issuer is
located at 968 James Street, Syracuse, New York 13203.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is filed by Clinton Group, Inc., a Delaware
corporation ("CGI"), Clinton Multistrategy Master Fund, Ltd., a Cayman Islands
company ("CMSF"), Clinton Special Opportunities Master Fund, Ltd., a Cayman
Islands company ("CSO"), Clinton Lexington Master Fund, L.P., a Cayman Islands
exempted limited partnership ("CLEX") and George Hall (collectively, the
"Reporting Persons").
(b) The principal business address of CGI and George Hall is 9 West
57th Street, 26th Floor, New York, New York 10019. The principal business
address of CMSF, CSO and CLEX is c/o Fortis Fund Services (Cayman) Limited, P.O.
Box 2003 GT, Grand Pavilion Commercial Centre, 802 West Bay Road, Grand Cayman,
Cayman Islands.
(c) The principal business of CGI is investing for funds and accounts
under its management. The principal business of CMSF, CSO and CLEX is to invest
in securities. George Hall is the Chief Investment Officer and President of CGI.
(d) None of the Reporting Persons nor any of the individuals set forth
in Schedule A attached hereto has, during the last five years, been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the Reporting Persons nor any of the individuals set forth
in Schedule A attached hereto has, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) George Hall is a citizen of the United States of America.
The name, citizenship, present principal occupation or employment and
business address of each director and executive officer of CGI, CMSF, CSO and
CLEX is set forth in Schedule A attached hereto. To the best of the Reporting
Persons' knowledge, except as set forth in this statement on Schedule 13D, none
of such individuals owns any Shares.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Funds for the purchase of the Shares reported herein were derived from
available capital of CMSF, CSO and CLEX. A total of approximately $16.2 million
was paid to acquire such Shares.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Persons originally acquired Shares for investment in the
ordinary course of business because they believed that the Shares, when
purchased, were undervalued and represented an attractive investment
opportunity.
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 8 OF 13 PAGES
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On September 7, 2007 CGI sent a letter to the Issuer's Chairman and
CEO, Mr. Alan Vituli, expressing confidence in the Issuer's management team and
business strategy. The letter stated CGI's belief that the market has
misunderstood the Issuer's story and growth prospects since its IPO pricing last
year and further noted that the issuer trades at a substantial discount to its
peer group and to restaurant M&A multiples. CGI stated that, in the future
absence of multiple enhancement and stock appreciation, it would be happy to
help the Issuer explore more broad based strategic alternatives including a
return to a delisted private company or would consider an appointment to the
Issuer's board of directors. A copy of this letter is attached hereto as Exhibit
B and incorporated herein by reference.
Except as set forth herein or as would occur upon completion of any of
the actions discussed herein, including in any Exhibits hereto, the Reporting
Persons have no present plan or proposal that would relate to or result in any
of the matters set forth in subparagraphs (a)-(j) of Item 4 of Schedule 13D. The
Reporting Persons intend to review their investment in the Issuer on a
continuing basis and may engage in discussions with management, the board of
directors, other shareholders of the Issuer and other relevant parties
concerning the business, operations, board composition, management, strategy and
future plans of the Issuer. Depending on various factors including, without
limitation, the Issuer's financial position and strategic direction, the outcome
of the discussions and actions referenced above, actions taken by the board of
directors, price levels of the Shares, other investment opportunities available
to the Reporting Persons, conditions in the securities market and general
economic and industry conditions, the Reporting Persons may in the future take
such actions with respect to their investment in the Issuer as they deem
appropriate including, without limitation, purchasing additional Shares or
selling some or all of their Shares, engaging in short selling of or any hedging
or similar transactions with respect to the Shares and/or otherwise changing
their intention with respect to any and all matters referred to in Item 4 of
Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of the close of business on September 6, 2007, the Reporting
Persons excepting George Hall may be deemed the beneficial owners of an
aggregate of 1,124,561 Shares, constituting approximately 5.2% of the Shares
outstanding. George Hall may be deemed the beneficial owner of 1,139,761 Shares,
including 15,200 Shares beneficially owned individually, constituting
approximately 5.3% of the Shares outstanding.
The aggregate percentage of Shares beneficially owned by the Reporting
Persons is based upon 21,550,827 Shares outstanding, which is the total number
of Shares outstanding as of August 3, 2007 as reported in the Issuer's Quarterly
Report on Form 10-Q filed August 8, 2007 for the period ended July 1, 2007.
(b) By virtue of investment management agreements with each of CMSF, CSO
and CLEX, CGI has the power to vote or direct the voting, and to dispose or
direct the disposition, of all of the 939,989 Shares held by CMSF, the 119,159
Shares held by CSO and the 65,413 Shares held by CLEX. By virtue of his direct
and indirect control of CGI, George Hall is deemed to have shared voting power
and shared dispositive power with respect to all Shares as to which CGI has
voting power or dispositive power. Individually, George Hall also has sole
beneficial ownership of an additional 15,200 Shares. Accordingly, CGI and George
Hall are deemed to have shared voting and shared dispositive power with respect
to an aggregate of 1,124,561 Shares and George Hall is deemed to have sole
voting power and dispositive power with respect to an additional 15,200 Shares.
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 9 OF 13 PAGES
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(c) Information concerning transactions in the Shares effected by the
Reporting Persons during the past sixty days is set forth in Schedule B hereto
and is incorporated herein by reference. Unless otherwise indicated, all of such
transactions were effected in the open market.
(d) No person other than the Reporting Persons is known to have the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The Reporting Persons may, from time to time, enter into and dispose of
cash-settled equity swap or other similar derivative transactions with one or
more counterparties that are based upon the value of Shares, which transactions
may be significant in amount. The profit, loss and/or return on such contracts
may be wholly or partially dependent on the market value of the Shares, the
relative value of Shares in comparison to one or more other financial
instruments, indexes or securities, a basket or group of securities in which
Shares may be included, or a combination of any of the foregoing. In addition to
the Shares that they beneficially own without reference to these contracts, the
Reporting Persons currently have long economic exposure to 444,533 Shares
through such contracts. These contracts do not give the Reporting Persons direct
or indirect voting, investment or dispositive control over any securities of the
Issuer and do not require the counterparties thereto to acquire, hold, vote or
dispose of any securities of the Issuer. Accordingly, the Reporting Persons
disclaim any beneficial ownership in any securities that may be referenced in
such contracts or that may be held from time to time by any counterparties to
such contracts.
Except as otherwise set forth herein, the Reporting Persons do not
have any contract, arrangement, understanding or relationship with any person
with respect to the securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A - Joint Filing Agreement dated September 7, 2007
EXHIBIT B - Letter to the Issuer dated September 7, 2007
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 10 OF 13 PAGES
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SIGNATURES
After reasonable inquiry and to the best of his or its knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: September 7, 2007
CLINTON GROUP, INC.
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
CLINTON MULTISTRATEGY MASTER FUND, LTD.
By: Clinton Group, Inc. its investment
manager
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD.
By: Clinton Group, Inc. its investment
manager
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
CLINTON LEXINGTON MASTER FUND, L.P.
By: Clinton Group, Inc. its investment
manager
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
/s/ George Hall
------------------------------
George Hall
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 11 OF 13 PAGES
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SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF CERTAIN REPORTING PERSONS
The following sets forth the name, position and principal occupation of
each director and executive officer of CGI. Each such person is a citizen of the
United States of America. The business address of each director and executive
officer is 9 West 57th Street, 26th Floor, New York, New York 10019.
CLINTON GROUP, INC.
Name Position
- --------------------------- -------------------------------------------
George E. Hall Director and President
Francis A. Ruchalski Director and Chief Financial Officer
Wendy Ruberti General Counsel and Assistant Secretary
John L. Hall Director
Hani K. Findakly Director
The following sets forth the name, citizenship, principal occupation and
business address of each director of each of CMSF and CSO, and of the general
partner of CLEX. There are no executive officers of CMSF, CSO and CLEX.
CLINTON MULTISTRATEGY MASTER FUND, LTD.
Jane Fleming is a citizen of the United Kingdom. Her principal occupation is
Client Accountant of Queensgate Bank & Trust Company Ltd. Her business address
is Queensgate Bank & Trust Company Ltd., Harbour Place, 5th Floor, 103 South
Church Street, P.O. Box 30464 SMB, Grand Cayman, Cayman Islands.
Dennis Hunter is a citizen of the United Kingdom. His principal occupation is
Director of Queensgate Bank & Trust Company Ltd. His business address is
Queensgate Bank & Trust Company Ltd., Harbour Place, 5th Floor, 103 South Church
Street, P.O. Box 30464 SMB, Grand Cayman, Cayman Islands.
Roger Hanson is a citizen of the United Kingdom. His principal occupation is
director of dms Management Ltd. His business address is dms Management Ltd.,
P.O. Box 31910 SMB, Ansbacher House, 20 Genesis Close, Grand Cayman, Cayman
Islands.
Blair Gauld is a citizen of New Zealand. His principal occupation is Director of
Queensgate Bank & Trust Company Ltd. His business address is Queensgate Bank &
Trust Company Ltd., Harbour Place, 5th Floor, 103 South Church Street, P.O. Box
30464 SMB, Grand Cayman, Cayman Islands.
CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD.
Dennis Hunter's citizenship, principal occupation and business address are set
forth above.
Roger Hanson's citizenship, principal occupation and business address are set
forth above.
Cassandra Powell is a citizen of the Cayman Islands. Her principal occupation is
Senior Manager of Queensgate Bank & Trust Company Ltd. Her business address is
Queensgate Bank & Trust Company Ltd., Harbour Place, 5th Floor, 103 South Church
Street, P.O. Box 30464 SMB, Grand Cayman, Cayman Islands.
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 12 OF 13 PAGES
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CLINTON LEXINGTON MASTER FUND, L.P.
Clinton GP, Inc., a Delaware limited liability company ("Clinton GP"), is the
general partner of Clinton Lexington Master Fund, L.P. Clinton GP is controlled
by George E. Hall. George E. Hall's citizenship, principal occupation and
business address are set forth above.
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CUSIP NO. 14574X104 SCHEDULE 13D PAGE 13 OF 13 PAGES
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SCHEDULE B
TRANSACTIONS IN THE SHARES BY THE REPORTING PERSONS DURING THE PAST 60 DAYS
Clinton Multistrategy Master Fund, Ltd.
Trade Date Shares Purchased (Sold) Price Per Share ($)
---------- ----------------------- -------------------
07/09/07 (10,000) 14.65
07/12/07 (1,944) 14.49
08/31/07 4,000 10.97
Clinton Lexington Master Fund, L.P.
Trade Date Shares Purchased (Sold) Price Per Share ($)
---------- ----------------------- -------------------
08/24/07 17,000 11.50
08/30/07 5,000 10.82
08/30/07 10,213 10.83
09/06/07 28,200 11.88
09/06/07 5,000 11.93
George Hall
Trade Date Shares Purchased (Sold) Price Per Share ($)
---------- ----------------------- -------------------
08/30/07 5,000 10.82
08/30/07 10,200 10.83
EXHIBIT A
JOINT FILING AGREEMENT
PURSUANT TO RULE 13d-1(k)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D may be filed on behalf
of each of the undersigned without the necessity of filing additional joint
filing agreements. The undersigned acknowledge that each shall be responsible
for the timely filing of such amendments, and for the completeness and accuracy
of the information concerning him or it contained herein and therein, but shall
not be responsible for the completeness and accuracy of the information
concerning the others, except to the extent that he or it knows or has reason to
believe that such information is inaccurate.
Dated: September 7, 2007
CLINTON GROUP, INC.
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
CLINTON MULTISTRATEGY MASTER FUND, LTD.
By: Clinton Group, Inc. its investment
manager
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
CLINTON SPECIAL OPPORTUNITIES MASTER FUND, LTD.
By: Clinton Group, Inc. its investment
manager
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
CLINTON LEXINGTON MASTER FUND, L.P.
By: Clinton Group, Inc. its investment
manager
By: /s/ Francis Ruchalski
---------------------------
Name: Francis Ruchalski
Title: Chief Financial Officer
/s/ George Hall
------------------------------
George Hall
EXHIBIT B
LETTER TO ISSUER
CLINTON GROUP
9/7/2007
Carrols Restaurant Group, Inc.
968 James Street
Syracuse, New York 13203
Attention: Alan Vituli
Chairman of the Board and Chief Executive Officer
Dear Mr. Vituli:
We appreciate the open dialogue that we have had with you and your management
team as we have endeavored to conduct due diligence on Carrols Restaurant Group,
Inc. ("Carrols" or the "Company"). We are confident that your management team
has the extensive restaurant industry experience necessary to be stewards of
Carrols in its growth initiatives and multi-brand positioning. As of today,
funds and accounts managed by Clinton Group Inc. ("Clinton") beneficially own
approximately 5.3% of the outstanding shares.
We have invested in a substantial portion of your common stock because we
believe that the market has misunderstood the Company's story and growth
prospects since your IPO pricing last year. While the name "Carrols Restaurant
Group" does not immediately conjure up a clear brand identity, we have been
impressed with our channel checks and food sampling at your Taco Cabana and
Pollo Tropical restaurants. Further, we agree with the strategy of harvesting
the cash flow of your leading Burger King franchise system to invest in new
store development of your Hispanic brands at industry-leading returns on
invested capital. Carrols' quick-service concepts offering convenience, value,
and significant food quality should be defensible even in a difficult consumer
discretionary environment.
As the chart below indicates, we note that Carrols appears to trade at an
astonishing discount to its peer group. Also, as you are aware, the restaurant
industry has been active with regards to M&A, and our work shows that implied
multiples of recent deals are in the range of 7.4x to 10.2x EBITDA which
includes some change in control premium. Based on street estimates, we estimate
Carrols' valuation multiple to be a depressed 7.0x 2007E EBITDA.
TAST Comparable Companies Precedent Range
-------- ----------------------- --------------------
2007 EBITDA 7.0x 7.9x -- 20.5x 7.4x -- 10.2x
Range of 2007E EBITDA Multiples
----------------------------------------------
7.50x 8.00x 8.50x 9.00x 9.50x 10.00x
Implied Carrols Stock Price $13.46 $15.38 $17.27 $19.15 $21.03 $22.91
------ ------ ------ ------ ------ ------
Selected comparable publicly traded companies include:
9 WEST 57TH STREET; NEW YORK, NY 10019 TEL: 212.825.0400 FAX: 212.825.0079
TEV / 2007E
Company Ticker EBITDA
- ----------------------------------------------- ------------
AFC Enterprises Inc. AFCE 9.7x
Burger King Corporation BKC 9.7x
Chipotle Mexican Grill, Inc. CMG 20.5x
Dominos Pizza Inc. DPZ 11.0x
Jack in the Box Inc. JBX 7.9x
McDonald's Corp. MCD 10.3x
Panera Bread Co. PNRA 9.0x
Tim Hortons Inc. THI 13.0x
Wendy's International Inc. WEN 10.5x
Yum! Brands Inc. YUM 10.0x
Selected comparable precedent transactions include:
TEV / LTM
Target Acquiror Date EBITDA
- ------------------ ------------------------------------------ ------- ---------
Friendly's Sun Capital 06/07 7.4x
Johnny Rockets RedZone Capital 02/07 10.2x
Sbarro MidOcean Partners 11/06 7.5x
Cheddar's Catterton Partners/Oak Investment Partners 08/06 9.6x
Bravo BRS & Castle Harlan 06/06 9.1x
El Pollo Loco Trimaran Capital Partners 09/05 9.4x
Taco Bueno Palladium Equity 06/05 8.0x
Church's Chicken Crescent Capital 11/04 7.4x
We have a long-term view regarding our investment in Carrols and would like to
continue to offer ourselves as a sounding board in your considerations to build
shareholder value. In the future absence of multiple enhancement and stock price
appreciation, we would be happy to help you explore more broad based strategic
alternatives including a return to a delisted private company or would consider
an appointment to the Company's board of directors.
Please feel free to contact me at your convenience at (212) 739-1833. We look
forward to speaking with you soon.
Sincerely,
/s/ Joseph De Perio
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Joseph De Perio
Vice President