Frankie & Benny’s owner gobbles up Wagamama
THE owner of Frankie & Benny’s is to acquire rival restaurant chain Wagamama in a deal worth £559m.
The Restaurant Group – which also owns Garfunkel’s, Joe’s Kitchen and Chiquito – will fund the deal through a combination of cash, debt and a rights issue.
Wagamama, which boasts 133 UK outlets, is being sold by private equity firms Duke Street and Hutton Collins.
Restaurant Group chief executive Andy McCue said: “This transaction is an exciting and transformative opportunity to create a business which can pursue a truly multipronged growth strategy and create substantial value for our shareholders.
“Wagamama is a fantastic brand, with a market-leading pan-Asian proposition, which has consistently outperformed the casual dining market in recent years.
“Central to this success has been a cohesive culture and clear brand values which are focused on making the right choices for customers.”
The Restaurant Group will embark on a rights issue to raise £315m and draw on a £220m revolving credit facility to bankroll the deal.
However, investors took a dim view of the deal, sending the Restaurant Group’s shares down over 17% to 246p in morning trade following the announcement.
Mr McCue has been overseeing a turnaround at the Restaurant Group, which has seen a revamp of pricing, food quality and marketing, as well as restaurant closures. This saw three Chiquito restaurants in Wales close as part of a strategic review in 2016, while the Frankie & Benny’s outlet in Friars Walk in Newport ceased trading last year.
Mr McCue plans to accelerate the roll out of Wagamama’s across the UK, expand concessions and pilot pan-Asian cuisine “food-to-go” offerings. The firm will also explore international growth opportunities for Wagamama.
Emma Woods, currently chief growth officer, will become the Wagamama CEO and chairman Allan Leighton will join the Restaurant Group board.
Mr McCue added: “The transaction not only gives us a great brand but also creates a business with a multi-pronged growth strategy which will enhance earnings with continued selective UK rollout, accelerated via conversions of some TRG sites; by further leveraging the brand in concessions both in the UK and internationally; by maximising the opportunities presented by the rapidly growing delivery sector; and by optimising the potential within international markets.”
The deal comes at an increasingly challenging time for the eating-out sector as it continues to suffer from a slowdown in consumer spending.
Burger chain Byron, Jamie’s Italian and Prezzo have all undertaken company voluntary arrangements this year, which saw hundreds of jobs lost and restaurants closed down.
Gaucho has administration.
Soaring costs linked to the Brexithit pound, the resultant collapse in consumer confidence and rising business rates have combined to hammer the sector, with more pain forecast.
However, Wagamama has outperformed the market, booking sales of £306.7m and with an operating profit of £43m last year.
The transaction represents a windfall for Duke Street and Hutton Collins, which acquired Wagamama in 2011 for £215m when the group had 70 restaurants. also fallen into