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Carl's Jr, Hardee's Sale: Good For Shareholders But Bad for the Company

The bidding war is over for classic fast-food brands Carl's Jr. and Hardee's, as parent company CKE Restaurants (CKR) announced it's accepted an offer from a subsidiary of the private-equity firm Apollo Global Management. The deal puts about $80 million more into shareholders' pockets than a rival offer from Thomas H. Lee partners would have, but in the long run the company would have been better off in Lee's stable.

Lee has several very strong food brands in its portfolio, including breakfast powerhouse Dunkin' Donuts and foodservice giant Aramark. An alliance with Lee held the promise of possible cross-pollination with these companies, which could have given the burger chains everything from tasty new breakfast items to supply-chain efficiencies.

Apollo has a spottier track record -- it owned now-dead Linens 'n Things and lender Countrywide, now the poster child for bad home-lending practices. Among its surviving portfolio companies, it's hard to see the same obvious synergies a Lee purchase would have provided.

For instance, there isn't a single restaurant brand in Apollo's portfolio, though some of its companies deal with food. They're stronger in cruise lines and retail chains, with ownership of girls' accessory chain Claire's, AMC Entertainment, Norwegian Cruise Line and Harrah's Entertainment.

Maybe we'll see Carl's Jr. food counters inside AMC theaters, on cruise ships or inside Vegas casinos in the future. But the alliances are less intuitive compared with lining up with Dunkin's parent. Apollo is also preoccupied right now with trying to go public -- its second try in the past two years. Its filings for the IPO indicate Apollo has shown a net loss for at least three years, though it did well last year with its investments, reporting more than $500 million in income. It doesn't seem like the best situation for a couple of brands that could use some TLC as they struggle to compete against lower-priced burger chains, including leader McDonald's (MCD).

Photo via Flickr user Mykl Roventine