REG - Restaurant Group PLC - Proposed sale of Leisure business to BTG

RestaurantAnnouncement

11/09/2023 07:00

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RNS Number : 9921L  Restaurant Group PLC  11 September 2023

The Restaurant Group plc

The Restaurant Group plc ("Group" or "TRG")

 

TRG signs agreement in respect of the proposed sale of Leisure business to Big
Table Group ("BTG")

 

Further to an announcement made on 9(th) September, TRG today announces that
it has entered into an agreement in respect of the proposed sale of its
Leisure business comprising of 75 trading sites and associated restaurant and
management team employees to the Big Table Group.  As part of the
transaction, TRG will pay a cash contribution of £7.5m to the Big Table
Group.  The transaction is expected to complete in early Q4 2023.

Compelling strategic rationale:  As part of the ongoing review of its
strategic options, the Board of TRG have concluded that a sale of its loss
making ( )Leisure business will significantly accelerate the Group's core
strategic goals of Adjusted EBITDA(1) margin accretion and deleveraging.  The
transaction will create a high-quality retained group consisting of the three
divisions of Wagamama, Pubs and Concessions which have delivered very strong
like-for-like sales and Adjusted EBITDA(1) growth during the first half of
2023, with appealing long-term prospects.

Strong financial effects:  The transaction has attractive financial and
strategic benefits for TRG:

·    Accelerates TRG's Adjusted EBITDA(1) margin accretion plan in excess
of 100bps in its first full year following completion (FY24)

·    Expected to be marginally EPS accretive in its first full year
following completion

·    Expected to improve post-IFRS 16 leverage with a reduction of IFRS-16
lease liabilities of c.£50m

·    Expected to further accelerate our progress to achieve net
debt/Adjusted EBITDA(1) below 1.5x before the end of FY25

The Board is continuing to actively explore its strategic options to further
accelerate margin accretion and deleveraging.

Andy Hornby, Chief Executive Officer of TRG, commented:

"A sale of our Leisure business significantly accelerates our medium-term
strategic plans to increase Adjusted EBITDA margins and reduce leverage.  On
behalf of TRG, I would like to express our massive thanks to the
extraordinarily hardworking and dedicated teams across the Leisure business
who have made huge improvements in the customer proposition over the last few
years. We wish them all well as part of the Big Table Group."

Alan Morgan, Chief Executive Officer of the Big Table Group, commented:

"Creating, developing and acquiring brands that complement our existing
portfolio whilst offering widespread consumer appeal is a fundamental part of
our growth strategy. This exciting acquisition forms part of that strategy and
we are delighted to be welcoming this new team into The Big Table Group."

Background:  The subject of the transaction is 75 trading sites and
associated central costs and teams required to run those sites, principally
comprising of the brands Frankie & Benny's and Chiquito. The Acquiror is
Baltra Bidco Limited, a newly-incorporated company wholly owned by the Big
Table Group Limited, one of the leading independent operators of restaurants
in the UK, owned by the private equity firm Epiris.

While the transaction is expected to complete in early Q4 2023, TRG will
provide certain customary services (as part of a service agreement) at cost to
Big Table Group for a limited period of time to ensure an orderly operational
transition for the 75 trading sites currently within the Leisure business.
This transition is expected to be completed by 31st March 2024.

Transaction overview: The sale includes the transfer of the entire issued
share capital of TRG's wholly-owned subsidiary, The Restaurant Group (UK)
Limited (the "Subsidiary") to the Acquiror. Sites that have been previously
closed as part of the Leisure businesses estate rationalisation plan will
remain the responsibility of TRG.

 

As stated in our interim results announcement on 6(th) September 2023, the TRG
property and operations teams have made good progress in efficiently managing
the disposal programme of closed sites and we expect to exit the majority of
the lease obligations of the recently closed sites by the end of FY24.  We
would therefore expect the remaining liability and expected cash outflow from
closed sites (most of which are currently sub-let) to be no more than £1m to
£2m a year from FY25 onwards.

 

The consideration payable by the Acquiror to the Group on completion of the
sale is £1. In addition TRG will pay a cash contribution of £7.5m, subject
to certain cash, debt and working capital adjustments, and there will likely
be a minor working capital outflow for TRG in the FY23 year-end.  TRG expects
the transaction to accelerate our deleveraging profile from FY24 onwards.

 

About The Big Table Group

The Big Table Group Limited, is one of the leading independent restaurant
companies in the UK, operating over 160 sites under brands such as "Bella
Italia", "Las Iguanas" and "Banana Tree".

The Big Table Group is owned by private equity firm Epiris, which is
committed to supporting a strategy of creating exceptional dining experiences
by investing in culture and people through an award-winning training and
development programme.

About TRG's Leisure business

Prior to the pandemic, TRG's Leisure business comprised 350 sites (as at
December 2019).  Over the last three years, the Group has reduced its
exposure to this "challenged" segment of the market by undergoing significant
restructuring resulting in a remaining trading portfolio of 75 sites, which
are being acquired by the "Big Table Group" Limited.

TRG's Leisure business consists primarily of the Frankie & Benny's and
Chiquito brands. Frankie and Benny's is an Italian American brand offering
real good comfort food and Chiquito has been delivering the top quality
Mexican cuisine in a fun, fiesta-style environment for over 30 years.
 Following the restructure of the Leisure business in May 2020, the business
has been positioned post Covid with improved food quality and service levels
and a focus on delivery growth, all of which have contributed to significantly
improved customer ratings.  The Leisure business employs approximately 3,000
people all located in the UK.

For the FY22 year-end, The Leisure business statutory loss before tax(2) was
£65m.  Gross assets for the subsidiary "TRG UK Limited" were £111m as at
the latest reported balance sheet (2(nd) July 2023).

The transaction constitutes a class 2 transaction for the purposes of the UK
Listing Rules.

About TRG

The Restaurant Group plc had approximately 380 restaurants and pub restaurants
throughout the UK as at 10 September 2023. Its principal trading brands are
Wagamama and Brunning & Price.  It also operates a multi-brand
Concessions business which trades principally in UK airports.  In addition,
the Wagamama business has a 20% stake in a JV operating seven Wagamama
restaurants in the US and c. 60 franchise restaurants operating across a
number of territories.

 

(1) Pre-IFRS 16 Adjustment and exceptional charges

(2) The statutory loss was due to the impact of significant exceptional items
relating mainly to non-cash impairment charges

 

 

Enquiries:

 The Restaurant Group plc                            020 3117 5001

 Andy Hornby, Chief Executive Officer

 Mark Chambers, Chief Finance Officer Designate

 Umer Usman, Investor Relations

 MHP Communications                                  07885224532/07584142665

 Oliver Hughes

 James McFarlane

 

IMPORTANT NOTICE

This announcement contains inside information for the purposes of Article 7 of
the UK version of the Market Abuse Regulation (EU) No. 596/2014.  Upon the
publication of this announcement the inside information is now considered to
be in the public domain. The person responsible for arranging the release of
this announcement on behalf of TRG is Andrew Eames (General Counsel &
Company Secretary).

Lazard & Co. Limited acted as financial adviser to TRG

Lazard & Co., Limited, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority, is acting exclusively as financial
adviser to TRG and no one else in connection with the proposed transaction and
will not be responsible to anyone other than TRG for providing the protections
afforded to clients of Lazard & Co., Limited nor for providing advice in
relation to the proposed transaction or any other matters referred to in this
announcement. Neither Lazard & Co., Limited nor any of its affiliates owes
or accepts any duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Lazard & Co., Limited in connection with
this announcement, any statement contained herein or otherwise.

 

 

 

 

 

 

 

 

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