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Frankie & Benny's owner to buy Wagamama despite investor backlash | |
(35 minutes later) | |
The Restaurant Group will go ahead with its £550m deal to buy Wagamama despite a backlash from several major investors. | |
The firm, which owns chains including Frankie & Benny and Garfunkel's, said about 60% of shareholders voted for the tie-up. | The firm, which owns chains including Frankie & Benny and Garfunkel's, said about 60% of shareholders voted for the tie-up. |
Big-name shareholders had opposed the deal over concerns about price and debt levels for the Restaurant Group. | Big-name shareholders had opposed the deal over concerns about price and debt levels for the Restaurant Group. |
Shares in the company sank 10% on Wednesday. | |
The group, which also owns the Coast to Coast and Chiquitos chains, agreed to buy Wagamama in late October and wants to expand the chain. | The group, which also owns the Coast to Coast and Chiquitos chains, agreed to buy Wagamama in late October and wants to expand the chain. |
It said Wagamama, which has more than 190 restaurants, has outperformed the UK's casual dining market despite a consumer spending slowdown that has forced some chains to close outlets. | It said Wagamama, which has more than 190 restaurants, has outperformed the UK's casual dining market despite a consumer spending slowdown that has forced some chains to close outlets. |
But shareholders including Pensions and Investment Research Consultants (Pirc) and Columbia Threadneedle Investments had opposed the takeover. | But shareholders including Pensions and Investment Research Consultants (Pirc) and Columbia Threadneedle Investments had opposed the takeover. |
They said the deal is too expensive given it values Wagamama at more than 13 times its enterprise value before interest and other costs. | |
Some also warned it could push the Restaurant Group's debt to risky levels. | |
It plans to pay £357m in cash and raise £315m in a deeply discounted rights issue. | |
On Tuesday, Pirc said the "risks and adverse implications for shareholders appear too great to overlook". | On Tuesday, Pirc said the "risks and adverse implications for shareholders appear too great to overlook". |
What is Wagamama? | What is Wagamama? |
Restaurant chains have struggled recently, with Byron, Jamie's Italian and Prezzo among those to have closed branches and shed staff. | |
Reasons for the downturn include higher raw material costs, partly due to the weaker pound since the Brexit vote, waning consumer spending power and higher business rates. | |
However, the Restaurant Group has said Wagamama has a "strong competitive advantage" as it is three times the size of its nearest rival and is the only big pan-Asian brand concept with scale in the UK. The chain is owned by private equity firms Duke Street and Hutton Collins. | |
About two thirds of Wagamama's directly-operated and franchised restaurants are in the UK, and its most-recent figures show same-store sales growth of 9.6%. | |
Despite this, shares in The Restaurant Group have fallen close to 30% since the deal was first announced on 30 October. |