American Blue Ribbon, J. Alexander's polish off '13 with rising margins

Parent company planning tracking stock for dining chains, other side investments

The restaurant group that houses local concepts O'Charley's and J. Alexander's posted its best numbers of 2014 in the fourth quarter, with adjusted EBITDA growing by more than a third on sales that rose slightly.

Nashville-based American Blue Ribbon Holdings and J. Alexander's combined to produce a pre-tax profit of $8 million in the last three months of 2013 for their parent company Fidelity National Financial, reversing a $4 million net loss from a year before. The companies' adjusted EBITDA climbed to $26 million from $19 million, pushing their margin to 7 percent from 5.3 percent. Revenues for the quarter climbed 4 percent to $371 million, helped by O'Charley's posting its first same-store sales increase under the Fidelity National umbrella.

For the year, the Fidelity National restaurant group posted adjusted EBITDA of $81 million on revenues of $1.4 billion for an adjusted EBITDA margin of 5.8 percent.

Fidelity National executives recently took a big step toward spinning out their non-real estate operations — something a hedge fund last fall pushed for — by launching a plan for a tracking stock for those investments. American Blue Ribbon and J. Alexander's will account for 18 percent of the estimated $1.3 billion in assets that stock will represent and their $241 million value is up from $210 million a year ago. (Read the details here.)

Setting up the tracking stock is expected to take until this summer. But on his team's conference call with analysts and investors, Fidelity National Chairman Bill Foley said that doesn't mean those business are treading water in the meantime.

"If we have the opportunity to IPO one of the restaurant companies … this is not going to slow anything down," Foley said, adding that his team has received a few preliminary inquiries about buying some of its non-core businesses.

Foley did add that separating the restaurant companies and other investments — which include stakes in Ceridian/Comdata and an automotive parts manufacturer — means the tracking entity will no longer have all of the financial muscle of its parent behind it. Fidelity National is providing $200 million of support to set up what will be called Fidelity National Financial Ventures, but the group will be expected to stand on its own after that, which Foley said would make its acquisition strategy "somewhat muted."

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