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Tue 30th Oct 2018 - The Restaurant Group to buy Wagamama for £559m, Emma Woods to become CEO
The Restaurant Group to buy Wagamama for £559m, Emma Woods to become CEO: The Restaurant Group (TRG) has conditionally agreed to buy Wagamama for a cash payment of £357 million, representing an enterprise value of £559 million. This implies a multiple of 8.7x LTM August 2018 Ebitda including cost and site conversion synergies. The company said: “Wagamama is a differentiated, high growth pan-Asian proposition that has consistently and significantly outperformed its core UK market. Wagamama is well aligned to key structural trends, addressing customer demand for speed of service, delivery and healthy options. The combination of TRG and Wagamama creates a business with a compelling multi-pronged growth strategy, which will include: Acceleration of Wagamama’s UK roll-out with selected TRG site conversions; expansion of Wagamama’s UK concessions presence leveraging TRG’s existing relationships; significant combined delivery opportunities via restaurants and delivery kitchens; piloting of pan-Asian cuisine ‘food-to-go’ offerings; exploring international growth options enabled by Wagamama’s established international presence. The enlarged group will be strongly growth oriented and will benefit from a clear scale advantage, enabling the creation of significant shareholder value; together, the enlarged group is expected to derive circa 70% of outlet Ebitda from high growth segments; Wagamama will be run as an autonomous division of the enlarged group. Emma Woods, currently Wagamama chief growth officer, will become the Wagamama chief executive, leading an experienced operational team with a cohesive people focused culture; Allan Leighton, the current chairman of Wagamama, will join the TRG board at completion as a non-executive director.” The acquisition will be funded through a combination of cash, new debt and a rights issue. A rights issue is to be undertaken to raise circa £315 million of gross proceeds, which has been fully underwritten on a standby basis by JP Morgan Securities and is expected to be fully underwritten on launch by JPM and Numis Securities. In addition to the proceeds of the Rights Issue, the Acquisition will be financed through drawing on a £220 million revolving credit facility that has been underwritten for TRG by the Royal Bank of Canada as arranger and original lender and RBC Europe Limited as agent. TRG will assume Net Debt of £202 million in Wagamama, which includes the £225 million Wagamama senior secured notes, which are expected to remain outstanding immediately following completion by virtue of the terms and conditions governing the Notes which, subject to certain conditions having been met, allow for a change in the beneficial ownership of the issuer without requiring an offer to be made to noteholders to repurchase the Notes. Following completion, the enlarged group intends to adopt a policy of paying a dividend covered two times by earnings before exceptional items, with this policy reflected in the final dividend that the company declares for TRG FY 2018. After 42 weeks’ trade in 2018, The Restaurant Group total sales were 0.5% down on the comparable period in 2017 and like-for-like sales were 2.2% down. Since our half-year results announcement at the end of August, TRG has continued to make good progress, and like-for-like sales were up 1.4% in the 14 week period following the end of the World Cup. TRG 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. 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 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.”


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