REG - Tortilla Mexcn.Grill - Strategic acquisition of Chilango

Tortilla Mexican GrillAnnouncement

23/05/2022 13:15

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RNS Number : 4666M  Tortilla Mexican Grill PLC  23 May 2022

23 May 2022

Tortilla Mexican Grill PLC

("Tortilla" or the "Group")

Tortilla completes strategic acquisition of Chilango

Tortilla, the largest and most successful fast-casual Mexican restaurant group
in the UK, is delighted to announce the acquisition of Chilango Limited
("Chilango") for a total consideration of up to £2.75 million (the
"Acquisition") from investment firm RDCP Group Ltd.

Chilango is an award-winning fast-casual restaurant chain specialising in
Mexican food including burritos, salads and tacos. The business operates from
an estate of eight premium location UK sites, which offer both eat-in and take
away options, as well as through its delivery channel supported by delivery
kitchens.

 

Strategic rationale

The Acquisition strengthens Tortilla's position as the UK's leading
fast-casual Mexican chain and accelerates the Group's expansion across the UK,
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 wishes to take advantage of the high-quality
locations operated by Chilango and the trend of workers returning to offices.

As outlined at its IPO in October 2021, the Group plans to open 45 sites over
the next five years. The acquired Chilango sites are additional to the target
of 45.

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 5,500sq ft 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.

Transaction overview

The total consideration of £2.75 million is paid entirely in cash, with
£0.25m 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 26(th) December 2021, Chilango delivered revenue of
£7.3 million and loss before tax of £0.2 million.

The acquisition is expected to contribute EBITDA (pre-IFRS-16) of c.£0.1
million to the Group for the remainder of FY22 and FY23 EBITDA onwards of
c.£1.0m.

Richard Morris, CEO of Tortilla, commented: "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."

Sameer Rizvi, Chairman of Chilango and Founder/CEO of RDCP Group, commented:
"When we acquired Chilango in August 2020, the business and the sector were
facing significant headwinds. However, Richard Franks, his management team and
the board members, including Iryna Dubylovska and Wagamama COO 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 are the strongest
operators 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."

ENDS

The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018.

 

ENQUIRIES

 

 Tortilla Mexican Grill PLC                                Via Hudson Sandler
 Richard Morris, CEO
 Andy Naylor, CFO

 Liberum Capital Limited (Nominated Adviser, Sole Broker)  Tel: 020 3100 2222
 Andrew Godber
 Edward Thomas
 Nikhil Varghese

 Hudson Sandler (Public Relations)                         Tel: 020 7796 4133
 Alex Brennan                                              tortilla@hudsonsandler.com (mailto:tortilla@hudsonsandler.com)
 Lucy Wollam
 Charlotte Cobb

 

For further information, visit tortillagroup.co.uk
(https://tortillagroup.co.uk/)

 

About Tortilla Mexican Grill plc

 

Tortilla is the largest and most successful fast-casual Mexican restaurant
group in the UK specialising in the sale of freshly made Californian-inspired
Mexican cuisine. The Group had 68 sites worldwide as of 31 March 2022,
comprising 52 sites in the UK operated by the Group, three sites franchised to
SSP Group in the UK, four sites franchised to Compass Group UK & Ireland
and nine franchised sites in the Middle East.

 

The Group was founded in 2007 by Brandon Stephens, originally from California
who, upon his arrival in London in 2003, found it difficult to satisfy his
desire for quality burritos and tacos. As a result, Brandon established
Tortilla with a mission of offering customers freshly prepared, customisable,
and authentic Californian-inspired Mexican food.

 

The brand is synonymous with an energetic, vibrant culture, and with providing
a great value-for-money proposition. It embraces fast-growing sector trends
(including eating out, healthy eating, provenance, ethnic cuisine, delivery)
across a variety of locations, through a differentiated product offering which
is popular with a broad customer base, and a clearly defined multi-channel
marketing strategy. It benefits from flexible site locations and formats, and
a scalable central infrastructure.

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