The acquirer’s shareholders, who have been asked to contribute £315m to a rights issue to fund the deal, mirrored the displeasure and pushed the group’s share price down more than 15 per cent on the morning of the announcement. They’re probably not happy about Wagamama’s £202m of net debt or the fact that Restaurant Group will have to draw on its loan providers to complete the acquisition. Net debt is expected to rise to 2.5 times adjusted cash profits (Ebitda) on the completion of the transaction and management has changed the group’s dividend policy to help it deal with the debt. What’s more, Wagamama’s pre-synergy enterprise value to Ebitda multiple of 13 times looks pretty expensive for a restaurant operator.
But doubters would do well to browse Wagamama’s recent numbers, which are nothing short of extraordinary. During a period of unprecedented decline for the high-street restaurant sector (which, in the past nine months alone has claimed 12 Jamie’s Italians, 17 Gourmet Burger Kitchens, and 100 Prezzos), Wagamama has reported 228 consecutive weeks of market-beating like-for-like revenue growth. Between 2015 and 2017, the group’s sales rose at a compound annual rate of 17 per cent. The same figure, in the same period at Restaurant Group was a 0.4 per cent decline.