Private equity giant Apollo to buy Wagamana owner TRG

Wagamama’s parent company is set to be the latest London-listed business to go private after it agreed to be acquired by Apollo Global Management.

The Restaurant Group told investors it had rejected three previous takeover bids by the American private equity giant but has now reached a deal valuing its shares at around £506million and the firm overall at £701million.

At 65 pence per share, the proposal represents about a one-third premium on TRG’s closing price on Wednesday and an approximately two-thirds premium on its average share price over the past 12 months.

The Restaurant Group shares soared by 37.1 per cent to 66.3p on Thursday morning following the takeover bid’s announcement.

 Takeover deal: Wagamama’s owner The Restaurant Group has agreed to be bought by Apollo

TRG’s board has unanimously recommended that shareholders approve the offer, which it hopes will be finalised sometime early next year.

Back in March, the hospitality company unveiled a medium-term strategy to boost underlying earnings margins over a three-year period.

Since then, it has achieved ‘strong progress,’ including two earnings upgrades and healthy like-for-like growth in sales, volumes and market share.

The group expects to deliver a further uplift to margins from completing the sale of its loss-making leisure business, which houses the Frankie & Benny’s and Chiquito brands, to Cafe Rouge owner Big Table Group.

‘As a result of ongoing positive management actions and the margin accretion plan we announced in March this year, the group has recovered well from the challenges of the pandemic and the cost of living crisis,’ said TRG’s chairman Ken Hanna. 

‘The TRG Board continues to have confidence in the plan, but is cognisant of the premium and the certain value of the Apollo offer against the backdrop of a challenging macro-economic environment.’

Apollo believes the takeover would allow TRG access to essential capital and the ‘benefit of a long-term investment approach’, thereby helping it cope with the structural changes affecting the hospitality sector.

Alex van Hoek, a partner in its private equity business, said the injection of fresh capital was particularly important because the ‘outlook is still one of high interest rates and inflationary pressures’.

British restaurants, pubs and bars have struggled over the past year with soaring food and energy prices slowing their recovery from the Covid-19 pandemic.

TRG has performed relatively well against this challenge, bouncing back to a £2.3million pre-tax profit for the six months ending 2 July thanks to solid trading and lower impairment charges.

However, the company has faced backlash from activist investors over four consecutive annual losses and lacklustre share price performance.

Last month, Ken Hanna announced he would not seek re-election at the firm’s next annual general meeting in January amid major pressure from investors to quit.

Meanwhile, chief executive Andy Hornby has experienced a significant revolt over his compensation packages, with 45 per cent of voting investors in May opposing TRG’s pay report for the prior year when Hornby was awarded £792,000.

Analysts at Stifel remarked: ‘TRG has arguably been ‘in play’ for some time, given the activist interest and ongoing strategic review.’

Russell Pointon, director of consumer at Edison Group, said: ‘It will be interesting to see how the activist shareholders respond to the deal. 

‘The fact the share price has moved to a premium to the offer price indicates the market thinks a high offer will be required.’

This post first appeared on Dailymail.co.uk