The Restaurant Group Board said that it had considered all scenarios carefully, including ‘proactive discussions’ with possible purchasers for its individual divisions, but it concluded ‘that the certainty provided by this cash transaction was a superior outcome for TRG shareholders’.
The cash deal - which will see the group become a privately-owned company - values each of the company’s shares at 65p. This represents a 34% premium to TRG’s closing share price of 49p yesterday (11 October).
The acquisition implies an enterprise value of £701m and a multiple of around nine times TRG’s Adjusted EBITDA for the twelve months ended 2 July 2023.
The sale of The Restaurant Group comes after months of pressure from activist investors.
Shareholders including the Hong Kong-based fund Oasis Management have been pushing for changes in key board and management roles as well as the sale of some of the casual dining giant’s assets.
Last month, The Restaurant Group said it would sell its leisure division to the Big Table Group.
Commenting on the Apollo Group deal, Goodbody said: “While the business was clearly making good progress on its turnaround plan, we think this is an attractive offer for the Restaurant Group and we note the bid at 65p, though below mid-2021 highs of c.£1.20, reflects a healthy premium for a business that has struggled with de-leverage and margin pressures historically.”
“In addition, we note the shares are already +55% ytd, following recent guidance upgrades driven by strong trading performance in the Wagamama, Pubs and Concessions businesses and the announcement of the sale of the perennially struggling Leisure business.”
Last month, The Restaurant Group reported strong like-for-like sales growth in the first half of the year (H1), driven in part by the recovery of its concessions business.
Total revenue increased 10% to £467.4m in the 26 weeks to 2 July 2023, up from £423.4m in the same period last year.
TRG said its trading performance supports a ‘moderate increase’ in management’s adjusted EBITDA expectations for the 2023 financial year.