30th Oct 2018 08:23
LONDON (Alliance News) - Restaurant Group PLC on Tuesday said it has agreed to buy restaurant chain Wagamama, partly funded by a rights issue of shares.
Restaurant Group, which already owns brands such as Frankie & Benny's, Chiquito, and Garfunkel's, is to pay GBP357 million in cash for Wagamama, which it said represents an enterprise value of GBP559 million.
Shares were down 7.5% on Tuesday in early trade at 274.97 pence each.
The company said: "Wagamama is a differentiated, high growth pan-Asian proposition that has consistently and significantly outperformed its core UK market.
"The combination of Restaurant Group and Wagamama creates a business with a compelling multi-pronged growth strategy."
This will include, it said, the conversion of some existing sites into new Wagamama restaurants, piloting food-to-go, and "exploring international growth options".
Restaurant Group Chief Executive Andy McCue said: "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.
"Wagamama is a fantastic brand, with a market leading pan-Asian proposition, which has consistently outperformed the casual dining market in recent years."
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 Restaurant Group 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 will be run as its own autonomous division, with current Chief Executive Emma Woods leading the division and Chairman Allan Leighton joining Restaurant Group's board as a non-executive director.
To part-fund the deal, Restaurant Group is to raise GBP315 million in a rights issue, as well as drawing on a GBP220 million facility from the Royal Bank of Canada.
It is to assume GBP202 million of net debt in Wagamama, including GBP225 million of senior secured notes.
After the deal, Restaurant Group is to enact a dividend policy of a payout covered two times by earnings before exceptional items, which will start when it declares a final dividend for its current financial year ending January 2019. It did not previously have a formal dividend policy.
Restaurant Group also updated on current trading. After 42 weeks of 2018, total sales were down 0.5% year-on-year with like-for-like sales falling 2.2%. However, since the end of August, like-for-like sales have risen 1.4% "following the end of the [football] World Cup".
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