New York, Nov 13 - Bakery-cafe operator Panera Bread Co. said on Monday it agreed to buy a majority stake in a regional bakery chain for $21.1 million, in a move to establish a foothold in Phoenix and the Southwest.
Panera, which said it expects to incur charges of 4 to 5 cents per share related to the deal, is buying 51 percent of Paradise Bakery & Cafe Inc., a chain which owns 24 bakery-cafes similar to Panera's, and franchises 20 more.
Panera said it has the option to buy the remaining 49 percent in 2009. If it did not buy the remaining stake, Paradise's owners would have the right to buy back Panera's stake, the company said.
In August Panera announced a deal to develop franchised Panera restaurants in Phoenix.
Ashley Woodruff, an analyst at FBR Research, called the strategy a slight negative in the long term, since the presence of another chain could limit the benefits of Panera's national brand.
"We prefer companies to operate one brand, as we think the development of another brand, even if it is just regional, limits the benefits of creating a national brand like Panera," Woodruff wrote in a research note.
Panera said 2 to 3 cents per share in charges would be taken in 2006 and the rest would be taken at the time the deal closes, either this year or next.
Panera shares were down 1.6 percent, or 96 cents, at $59.51 on the Nasdaq in afternoon trading.