- Offer from Apollo Global Management a 34 per cent premium on Wednesday's closing price
- Board says buyout attractive in the uncertain environment despite business improvements
Private equity will take another High Street mainstay off the London Stock Exchange after the Restaurant Group’s (RTN) board backed a takeover offer from Apollo Global Management. The 65p-per-share deal values the Wagamama owner at £506mn, and the group’s debt takes the total value to £701mn. This is a 34 per cent premium on Wednesday’s closing price. Investment bank Jefferies had put a sum-of-the-parts value at 75p a share.
The group's chair Ken Hanna said the board was “cognisant of the premium and the certain value of the Apollo offer against the backdrop of a challenging macroeconomic environment”. Before Thursday’s 37 per cent share price hike, TRG had climbed 41 per cent year-to-date. The company’s high point was in 2015 when it traded above 500p while its sales peaked in 2019 at over £1bn.
Diners have returned this year, however. Wagamama sales were up 4 per cent in the first half and ramped up further in Q3. Overall sales were up 10 per cent in the first half, although operating profit remained weak at just £20mn, an operating margin of 4 per cent.
TRG had already started reshaping the business to shore up margins, selling off the leisure division for £1 last month. The company also handed £7.5mn to the buyer to take the loss-making Frankie & Benny’s and Chiquito chains off its hands.
Shore Capital analyst Greg Johnson said the offer was too low. "We do not believe it reflects the quality of the estate (especially having recently exited the challenged leisure business), the freehold asset backing (£160mn) and
the progress it was making across its strategic objectives on margin accretion (250-350bps) and
deleveraging (under 1.5x Ebitda)," he said, adding that 80p a share would be "a starting point more consistent with the longer-term opportunity".
Apollo partner Alex van Hoek said the outlook was rough for a public restaurant business. “TRG's business has proven resilient through macroeconomic cycles but the outlook is still one of high interest rates and inflationary pressures and the company now needs the support of patient private capital, to achieve its ambitions,” he said.
Investors in TRG had been pushing for change despite the improved trading, resulting in Hanna agreeing to stand down at the next AGM. Oasis Management and Irenic Capital, which called for his exit, have backed the takeover. Coupled with directors’ stakes, 19.9 per cent of TRG shares are committed to voting for the Apollo buyout. The deal will be put to shareholders with a 75 per cent threshold for a successful vote.
