RE: Transformative rns12 Sep 2023 06:08
Good write up in The Times;
The Restaurant Group called time on its lossmaking leisure division yesterday, announcing a deal under which it is paying the Big Table Group £7.5 million to take the business off its hands.
Big Table, the operator of brands such as Las Iguanas, Banana Tree and Café Rouge, is acquiring 75 restaurants, together with the central costs and 3,000 employees needed to run the sites, most of which trade under the Frankie & Benny’s and Chiquito brands.
The buyer, owned by Epiris, the private equity firm, is paying a nominal £1 for the business, but it will receive a cash sum of £7.5 million in recognition that it is taking on a business that made a loss last year of £65 million.
Despite the unusual nature of the deal, with the vendor paying a dowry to the seller, it went down well with the market, sending shares in The Restaurant Group up by 3.6 per cent, or 13⁄4p, to 491⁄4p.
It not only removes the group’s weakest business and about £50 million of lease liabilities, but also allows it to focus on its successful Wagamama, Brunning & Price and concessions units. The sale excludes the 17-outlet Barburrito estate.
Under pressure from activist investors led by Oasis Management, The Restaurant Group has been looking “to further accelerate margin accretion and deleveraging”. The group said it continued to “actively explore its strategic options” and some analysts believe it may switch its attention to selling its airport and railway concession business. James Wheatcroft, an analyst at Jefferies, said: “Further divisional disposals are possible, which would drive more deleveraging and, potentially, dividends.”
The Restaurant Group, formerly known as City Centre Restaurants, entered the pandemic with about 650 sites in the UK, plus a largely franchised overseas Wagamama business.
The exit will be hailed as another victory by Oasis, now the group’s biggest shareholder with a stake of almost 18 per cent stake. It has accused the company’s board of “strategic stagnation” and has called on it to “realign its priorities” and address its poor shareholder experience. It said The Restaurant Group had presided over “one of the worst-performing share prices of any UK leisure company” and criticised the “unpalatable” pay of Andy Hornby, 56, who became chief executive in 2019.
Its calls for management change secured partial success last week, when Ken Hanna, 70, the chairman, said he would be leaving at next year’s annual meeting.
Big Table, born from the ashes of the administration of Casual Dining Group in 2020, is expected to convert some of The Restaurant Group sites to its recently acquired Banana Tree brand, a pan-Asian concept with 15 sites. The deal will increase its estate from about 160 outlets to more than 230.
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