31st Mar 2005 15:38
Restaurant Group PLC31 March 2005 FOR IMMEDIATE RELEASE31 MARCH 2005 The Restaurant Group and Living Ventures in Dual Transactions The Restaurant Group to acquire a 40% shareholding in Living Ventures for £7.7 million Living Ventures to purchase Est Est Est business for £16.4 million Introduction The Restaurant Group plc ("The Restaurant Group" or "the Group") and LivingVentures Limited ("Living Ventures" or "LV") today announce the acquisition of a40% shareholding in Living Ventures by The Restaurant Group (TRG), and asimultaneous acquisition of the Est Est Est business by LV ("the Transactions"). The Restaurant Group will acquire a 40 per cent. shareholding in Living Venturesfor £7.7 million in cash. In addition, TRG will acquire for cash preferenceshares in LV for £2.2 million, redeemable in full in 3 years' time. The acquiredshares include the whole of the 30 per cent. stake owned by funds managed byBowmark Capital Limited (formerly Sagitta Private Equity), the mid-marketprivate equity firm. Simultaneously, Living Ventures will purchase Est Est Est Restaurants Limitedfrom The Restaurant Group for a consideration of £16.4 million, which will besatisfied by a loan note, of which £6.0 million is redeemable in 3 months' timeand the balance in 3 years. The Restaurant Group has also been granted a call option to purchase theremaining 60 per cent. of Living Ventures in 2008 and, if not so exercised, aseparate call option to purchase back Est Est Est from Living Ventures. Living Ventures Living Ventures was set up in 1999 by Tim Bacon and Jeremy Roberts followingseveral successful previous ventures. Living Ventures is a restaurant and barcompany currently operating 15 units, 11 of which trade as The Living Room, twoas Prohibition and two as Bar & Grill - its latest restaurant concept. The Living Room, a multi-level restaurant and bar concept which was firstlaunched in December 1999, is a casual dining restaurant and piano bar whichoffers a quality product with high levels of service at affordable prices acrossa broad customer base. The broad customer base and its ability to trade throughall sessions of the day across the week has enabled these units to achieveaverage sales of £45,000 per restaurant per week. Recent openings includeChester, York and Glasgow and further sites are planned in Oxford and two inLondon. In the year ended 31 March 2004 Living Ventures generated EBITDA (beforepre-opening costs) of £2.2 million and operating profit (post pre-opening costs)of £0.6 million on turnover of £19.5 million. Unit EBITDA was £4.1 million.Net assets as at 31 March 2004 were £2.2 million. Based on the results for the10 months ended 31 January 2005, Living Ventures' EBITDA (before pre-openingcosts) for the year ending 31 March 2005 is expected to be £3.3 million andoperating profit is expected to be at least £1.0 million. Rationale and benefits of the Transactions The Directors believe both companies benefit from the Transactions: • The Restaurant Group benefits from: o Access to the highly successful Living Ventures concepts and their future growth potential o An investment in a fast growing restaurant and bar concept o A complementary customer base o Est Est Est will benefit from Living Ventures management's entrepreneurial flair, staff training and development skills and creativity • Living Ventures benefits from: o A new, supportive shareholder o Critical mass - a larger estate o Access to PLC management skills and infrastructure (property, purchasing and IT) The Acquisition The Restaurant Group has agreed terms to acquire a 40 per cent. shareholding inLiving Ventures for a total cash consideration of £7.7 million ("theAcquisition") and a further £2.2 million for the purchase of the entire issuedpreference share capital of Living Ventures. The preference shares areredeemable at the same time as the loan notes referred to below. Call Options The Restaurant Group has also entered into a Call Option agreement whereby ithas the right to acquire the remaining 60 per cent. of Living Ventures in April2008 at a price (subject to a maximum of £47.5 million) dependent on theperformance of Living Ventures in the year ending 31 March 2008 ("The DeferredConsideration"). The Deferred Consideration will be based on a multiple of 8times LV's EBITDA and will be satisfied in cash or a mixture of cash and TheRestaurant Group shares (at the option of the Group). The Restaurant Group has also entered into a Call Option agreement with LivingVentures whereby if it does not exercise the option referred to above, it hasthe right to purchase back Est Est Est from Living Ventures in 2008 at a pricebased on a unit multiple of 6 times EBITDA (subject to maximum of £47.5million). This consideration is to be satisfied in cash, after offsetting anyresidual loan note balance. Disposal of Est Est Est to Living Ventures The Restaurant Group has agreed to dispose of Est Est Est Restaurants Limited ("Est Est Est") together with the restaurants trading as Est Est Est to LivingVentures for a total consideration of £16.4 million which will be satisfied by avendor loan note of which £6.0 million is redeemable in 3 months' time and thebalance is redeemable in 2008. The loan notes are secured by a first chargeover the assets of Est Est Est and bear interest at LIBOR. The proceeds of thedisposal will be used to reduce Group net debt. Est Est Est is a modern upmarket Italian restaurant brand with 19 units locatedthroughout the UK. In the year ended 31 December 2004 Est Est Est generatedoperating profit of £1.3 million on turnover of £17.2 million. The assets beingsold had a net book value at 31 December 2004 of £14.7 million. Financial effects and other matters The Directors of TRG expect the Transactions to be earnings enhancing in thefirst full financial year following the Transactions (see note 1). Alan Jackson is a director of both The Restaurant Group and Living Ventures andhas taken no part in the commercial negotiation of the Transactions. As aresult of the acquisition of Living Ventures, a previously agreed incentivearrangement is triggered which entitles Alan Jackson to a bonus of £222,000 fromBowmark. Andrew Page, Group Managing Director of The Restaurant Group plc, said: "This is a great fit for both companies. Living Room is one of the mostsuccessful new restaurant and bar concepts of recent years. It has a uniqueatmosphere created by the mix of its customers, design and ambience. We believethat its customer base is complementary to that of Est Est Est." Tim Bacon, Chief Executive of Living Ventures said: "The addition of Est Est Est is a transformational deal for Living Venturesproviding great opportunity for the Company to expand its product range andbecome even more food-led. We believe that we can redefine Est Est Est as anaspirational, high quality brand. We will be focussed on delivering performanceand on expanding an already successful business." 31 March 2005 THE RESTAURANT GROUP AND LIVING VENTURES WILL BE HOSTING A CONFERENCE CALL FORANALYSTS AT 16.15 HOURS TODAY. PLEASE CALL JAMIE RAMSAY AT COLLEGE HILL ON 0207457 2048 FOR DIAL-IN DETAILS. Enquiries: The Restaurant Group plc Living Ventures plcTel 020 7747 7750 Tel: 020 7747 7750 (today) Tel: 01565 631 234 (thereafter) Andrew Page, Group Managing Director Tim Bacon, Managing DirectorStephen Critoph, Group Finance Director Jeremy Roberts, Commercial and Finance Director Dresdner Kleinwort Wasserstein Bowmark Capital LimitedTel 020 7623 8000 Tel: 020 7189 9000 Christopher Baird Ron PearsonDavid Whiteley College Hill Tel: 020 7457 2020 Justine Warren Matthew Smallwood Note 1 This statement should not be taken to mean that future earnings per share of TheRestaurant Group following the Transactions will necessarily match or exceedhistoric earnings per share of The Restaurant Group and no forecast is intendedor implied. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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