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Mon 23rd May 2022 - Tortilla acquires Chilango, deal adds a ‘complementary, premium brand’
Tortilla acquires Chilango, deal adds a ‘complementary, premium brand’: Tortilla has announced the acquisition of rival Chilango for a total consideration of up to £2.75m from investment firm RDCP Group. Chilango currently operates eight sites, which offer both eat-in and take away options, as well as through its delivery channel supported by delivery kitchens. Tortilla said the acquisition strengthens its position as the “UK’s leading fast-casual Mexican chain” and accelerates its national expansion plans, a “key pillar of its long-term growth strategy”. The acquisition further bolsters Tortilla’s presence in central London, with six of the eight units positioned in Zone 1. The group said it “wishes to take advantage of the high-quality locations operated by Chilango and the trend of workers returning to offices”. Tortilla, which will next month open its 50th restaurant, in Portsmouth’s Gunwharf Quays, plans to open 45 sites over the next five years. The acquired Chilango sites are additional to this target. The company said: “The acquisition also adds a complementary, premium brand to the group, enabling Tortilla to capitalise on the popularity of the Chilango brand and the widespread growing demand amongst consumers for fast-growing sector trends including healthy eating, convenience and ethnic and customisable cuisine. As a result of the two companies’ similar product propositions, the group has identified several synergy opportunities, including but not limited to leveraging the group’s favourable buying power and 5,500-square-foot central production kitchen in Tottenham Hale. Tortilla intends to retain and continue to operate the Chilango brand at certain locations and via the delivery channel in a number of Tortilla sites. The total consideration of £2.75m is paid entirely in cash, with £250,000 of this total to be paid via an earn-out following the satisfaction of certain criteria relating to the leases, which is expected to take approximately six months. The transaction was done on a debt-free and cash-free basis, with the majority of the transaction consideration used to satisfy intercompany loans and other creditors. For the 52-week period to 26th December 2021, Chilango delivered revenue of £7.3m and loss before tax of £200,000. The acquisition is expected to contribute Ebitda (pre-IFRS-16) of circa £100,000 to the group for the remainder of FY22 and FY23 Ebitda onwards of circa £1m.” Richard Morris, chief executive of Tortilla, said: “We are delighted to announce Tortilla’s acquisition of Chilango. Chilango is a highly complementary brand that, similarly to Tortilla, provides a fantastic value-for-money proposition and embraces popular and growing sector trends for healthy, customisable food from an estate of restaurants situated in premium locations in London and Manchester. This acquisition accelerates our ambitious plans to further expand the Tortilla brand and these sites are in addition to our initial target of opening 45 UK restaurants over the next five years, helping us to surpass this target. It also adds another brand to the Tortilla Group, enabling us to further strengthen our leading position in the UK’s fast-casual dining market. We’re very excited about this acquisition and look forward to leveraging our combined knowledge and expertise within the Mexican fast casual dining sector.” RDCP Group acquired Chilango out of administration in August 2020 for £1m. Sameer Rizvi, chairman of Chilango and founder/chief executive of RDCP Group, said: "When we acquired Chilango, the business and the sector were facing significant headwinds. However, Richard Franks, his management team and the board members, including Iryna Dubylovska and Wagamama chief operating officer Nigel Sherwood, worked to stabilise the business, agree good deals with landlords and manage the supply chain. Chilango took advantage of the growing delivery market, which allowed the business to grow quickly and stay profitable even during national lockdowns. Today, the business has been successfully turned around and is ready for its next stage of growth. Tortilla is the strongest operator in this space and the perfect strategic fit for Chilango. I would like to take this opportunity to thank Richard Franks and the whole Chilango team as well as our loyal guests who have helped to develop the business into the established and popular brand it is today, and I look forward to seeing Chilango enter the next phase of its journey as a much-loved brand under Tortilla’s ownership.”

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