Mendoza School of Business

Former CEO of AFC Enterprises sells 1.3 million shares

Published: December 1, 2005 / Author: Robert Luke

While Frank J. Bellati’s company, AFC Enterprises, sells a lot of fried chicken, he lately has been selling a lot of his shares in the operator of the Popeyes Chicken & Biscuits restaurant chain.

And that’s not chicken feed.

In one of the largest sales of stock by a Georgia corporate insider this year, Belatti last month sold 1,325,000 shares of AFC Enterprises for more than $15.8 million. That’s after he acquired the shares for about $1.2 million by exercising stock options, many of which were due to expire next year.

“I put together a plan so that I could get these options exercised and sold so I could have [portfolio] diversification,” said the 57-year-old chairman of the Atlanta-based company. “I’m going to keep all of the stock I have remaining.”

He said the sale of stock wasn’t related to the company’s prospects.

“Popeyes has been performing well,” he said. “I think the prospects are very good for the brand.”

Bellati, who relinquished his job as CEO in September, still holds 444,791 shares directly and 194,476 shares indirectly in trusts for his four children. Those shares were worth a total $7.8 million at Wednesday’s closing price of $12.26.

AFC Enterprises’ single-largest shareholder continues to reduce its stake. Three partnerships run by the Freeman Spogli & Co. private equity firm this week sold about a quarter of their remaining holdings for nearly $17.6 million.

The partnerships, which sold 1.5 million shares at $11.70 each, had owned about 19 percent of AFC Enterprises’ shares outstanding after selling shares in June. They now own about 14.3 percent.

The sales were disclosed in filings with the Securities and Exchange Commission.

“They have been liquidating their position for the last four years, whenever they could,” said Bellati, adding that the partnerships made their initial investment in the company, then privately held, in 1996.

Private equity firms, such as Freeman Spogli, make short- or medium-term investments, typically in businesses with good growth prospects and predictable cash flows. They serve as the intermediary between investors with capital and businesses seeking to grow.

“They have done very well from their investment, between what they have sold when the company went public [in 2001] and what they have sold since,” said Bellati, who has been chairman since 1992. He said he couldn’t quantify those returns.

“I honestly don’t know,” he said. “Those are records that they keep.”

The partnerships — and Belatti — also benefited from an unusually large special dividend of $12 a share that the company paid to stockholders in June. The money came from $373 million AFC raised by selling its Church’s Chicken division and related assets.

What’s Bellati’s going to do with his cash?

He said he plans to contribute additional sums to the Center for Social Entrepreneurship at his alma mater, the University of Notre Dame. He endowed the program, part of the Gigot Center for Entrepreneurial Studies at the Mendoza College of Business, with $2 million three years ago.

“I don’t know the amount yet,” Bellati said. “Now that I am no longer CEO, I am spending a bit more time at Notre Dame. I’ll know more in the early part of next year.”

Bellati, whose son attends Notre Dame, described the program as akin to “a business Peace Corps” that connects entrepreneurs “in largely underprivileged areas in the U.S.” with Notre Dame students, educators and alumni.

“We’ve taken day care centers in small buildings in small communities and helped them build larger day care centers,” Bellati said.

The initial gifts to Notre Dame and to Dunwoody’s Marist School, which his four children attended, were funded by 2002 stock sales, he said.

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Topics: Mendoza