Fidelity National Financial (FNF - Snapshot Report), recently announced a newly formed luxury restaurant company, J. Alexander’s LLC, targeting the upscale dining segment.
The company will continue with the thirty two J. Alexander’s concepts on the earlier menu and with the ten Stoney River Legendary Steaks concepts. Stoney River was previously owned by Fidelity’s casual and family dining focused restaurant company, American Blue Ribbon Holdings, LLC (ABRH).
J. Alexander’s acquired Stoney River from American Blue Ribbon and allowed the latter an approximately 28% ownership position in the new company. Consequent to the deal, the restaurant service of Fidelity now has 55% and 87% ownership position in American Blue Ribbon and J. Alexander’s respectively and both will be headquartered in Nashville.
The deal is expected to augment the existing upscale dining oriented restaurant operations of Fidelity. As per management, restaurant operations can be best managed through separate emphasis on upscale dining focused companies, and family and casual dining focused companies. It enables both to reap maximum benefits from the respective market segments. With formation of J. Alexander’s LLC, Fidelity aims to enhance its upscale dining operations and hence maximize its overall value of restaurant operations thereby retaining investor confidence.
On the other hand, Fidelity’s exclusive focus on the upscale industry will upgrade J. Alexander’s restaurant operations. Moreover, the incorporation of Stoney River in its operations will help it realize its goal as a consistent leader in quality dining. It will also go towards improved financial performance of the restaurants.
We expect the formation of J. Alexander’s to push up the earnings of Fidelity by driving up sales through customer base enhancement. The Zacks Consensus Estimate for the first quarter of 2013 is pegged at 41 cents representing a year-over-year improvement of 28.1%.
Fidelity National has a consistent track record of acquisitions and partnerships to strengthen its existing lines of businesses. Earlier this month, Digital Insurance – a wholly-owned subsidiary of Fidelity announced a partnership with CUNA Mutual Group, a financial service provider dedicated to catering to the members and customers of employee unions.
Another title insurance provider, Stewart Information Services (STC - Snapshot Report), has entered into a partnership with the Canada based telecommunications company TELUS Financial Solutions (TU - Analyst Report) in October, 2012. It will function as the exclusive sales channel offering mortgage instructing and reporting solutions to the legal community.
Fidelity currently carries Zacks Rank #3 (Hold). Among others from the industry, Cincinnati Financial Corp. (CINF - Analyst Report) carries a favorable Zacks Rank #1 (Strong Buy) while Stewart and TELUS share the same Zacks Rank with Fidelity.