Wagamama owner Restaurant Group agrees to buyout by private equity giant Apollo
The owner of Wagamama, The Restaurant Group (TRG), has agreed to a takeover by private equity giant Apollo in a deal worth over £700 million.
Amid concerns about consumer spending and wider economic uncertainty, TRG said it supported the "certain value" offered by the deal. Apollo will pay 65p a share for TRG, which is a 34% premium on the firm's share price as of market close on Wednesday. This values TRG shares at around £506 million, or £701 million including debts.
After news of the planned takeover, TRG shares jumped by 37% to 66p. TRG owns the Wagamama chain of Asian noodle restaurants, as well as pubs including Brunning & Price, and food concessions at airports and travel locations, with around 380 sites in total across the UK.
The takeover comes after TRG recently agreed to sell off its loss-making leisure business restaurant chains Frankie & Benny's and Chiquito to Big Table Group the owner of Bella Italia, Las Iguanas and Banana Tree. Big Table is paying a nominal £1 for 75 eateries under the deal and will receive a "contribution" from TRG of £7.5 million, with the sale set to complete on October 30.
TRG chairman Ken Hanna said: "The TRG board and management of TRG have reviewed in detail the strategic options available to the group, resulting in the announcement of the proposed sale of the leisure business."
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The board of The Restaurant Group (TRG) has expressed confidence in their plan, but also acknowledged the value of Apollo's offer given the challenging economic environment.
Apollo, who has been keeping a close eye on TRG for many years, believes that despite its resilience through economic cycles, TRG now requires the support of patient private capital due to the current high interest rates and inflationary pressures. Alex van Hoek, a partner at Apollo, shared these sentiments.
Five years ago, TRG acquired Wagamama for £357 million, valuing the chain at £559 million overall.
However, retail expert Greg Johnson from Shore Capital thinks that the sale price for TRG is "too low". He argued that it doesn't reflect the quality of the estate, the freehold asset backing of around £160 million, or the progress made towards strategic objectives.
Recently, TRG reported half-year results showing a pre-tax profit of £2.3 million for the first six months up to July, a significant improvement from a £28.5 million loss during the same period last year. Despite facing increasing costs like the rest of the hospitality sector, TRG expects these costs to decrease soon.
Wagamama has reported an 11% increase in sales from dine-in customers over the first half of the year, but takeaway orders have fallen by 8%, according to the company.
* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to [email protected]
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