The Restaurant Group (TRG), owner of Frankie & Benny’s and Chiquito, this morning stunned the market by revealing it has reached an agreement to take over Wagamama in a deal worth £559m.
TRG described the deal as a “transformative opportunity” to accelerate its growth strategy and create significant shareholder value.
It said that Wagamama represented “a differentiated, high growth pan-Asian proposition” that has consistently and significantly outperformed its core UK market.
TRG plans to accelerate Wagamama’s UK roll-out with selected TRG site conversions and expand its UK concessions presence by leveraging its own existing relationships.
The company added that it sees “significant” combined delivery opportunities via restaurants and delivery kitchens.
It is estimated that the acquisition, which is expected to be earnings per share enhancing in the first full year following completion, will result in cost synergies and site conversions synergies of approximately £22m.
TRG said that the acquisition will be funded through a combination of cash, new debt and a rights issue.
“This transaction is an exciting and transformative opportunity to create a business which can pursue a truly multi-pronged growth strategy and create substantial value for our shareholders,” said Andy McCue, CEO of TRG.
“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 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 roll-out, 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.”
Wagamama currently operates 138 directly-operated restaurants in the UK and the US and 58 franchised restaurants in Europe, the Middle East and New Zealand.
In its last financial year, it reported revenues of £307m and and generated EBITDA after pre-opening costs of £43m.