Sophisticated Continentals and British Cuisine

Sophisticated continentals love to criticize British cuisine. The Restaurant Group must shoulder some of the blame given the mixed customer reviews for its chains, including Garfunkel’s and Frankie & Benny’s. The first closed its doors, while that of TRG division at a loss containing the Frankie & Benny’s chain was sold last month.

On Thursday, TRG was on the menu. An offer from buyout fund Apollo values ​​the group at £700m, including debt. What Apollo would get are around 80 TRG-owned pubs, plus lucrative airport concessions.

TRG’s Struggles and Shareholder Reactions

Shareholders may find this price no more appetizing than a reheated lasagna. Before the offering, the share price had lost around 80% of its value over the past five years. That period coincides with TRG’s ownership of its flagship asset, Asian-style chain Wagamama, acquired in 2018 for £560m.

The activist fund Oasis should be satisfied. Over the past year, she has agitated for change and it has had some effect. A year ago, the shares traded as low as 26 cents. The 65p cash offer represents a 67% premium to the one-year average. Oasis has already agreed to sell their 18% stake.

All long-time shareholders will want to dig into the details in more depth. An enterprise value multiple of around 8x next year’s EBITDA might seem fair compared to rivals like Loungers, which trade on 6x. Bowling alley operators receive similar ratings. Pub chain Mitchells & Butlers commands an 8x multiple but owns 80% of its properties.

Apollo’s Interest in TRG’s Property Portfolio

And the property offers the real meat Apollo seeks. TRG has its own property portfolio, valued at £160m at the end of last year. Apollo could look to make money from this via a sale-leaseback transaction. If seen as a source of cash, this would, in turn, reduce the enterprise value of the operation.

Seen in this way, the valuation multiple of the operation drops to almost 6 times. This is cheap enough that TRG’s long-suffering shareholders deserve a few more crumbs from Apollo’s plate. Even after applying a discount to the property’s valuation, shareholders should hold out for a price closer to 80 cents.

The Future of TRG and Apollo’s Offer

The future of TRG is uncertain, with Apollo’s offer being a potential lifeline. However, shareholders and industry experts are divided on whether the offer fully reflects the value of the company and its assets.

If the offer is accepted, Apollo will take control of 80 TRG-owned pubs, which could prove to be a lucrative acquisition. Additionally, the airport concessions add another layer of profitability to the deal.

However, critics argue that the offer undervalues TRG’s property portfolio and does not adequately compensate long-term shareholders who have endured substantial losses over the past five years. They believe that a higher price, closer to 80 cents, would be more reasonable.

Unlock the Publisher’s Digest for Free

Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.

Summary

The Restaurant Group (TRG), known for its chains such as Garfunkel’s and Frankie & Benny’s, has faced challenges in recent years. Mixed customer reviews and decreasing share prices have put the company under pressure. However, an offer from buyout fund Apollo has sparked interest in TRG and its future.

Apollo’s offer values TRG at £700m, including debt. This deal would provide Apollo with around 80 TRG-owned pubs and lucrative airport concessions. While some shareholders may find the offer unappetizing, others appreciate the 67% premium it represents compared to the one-year average share price.

One key aspect of TRG that Apollo finds appealing is its property portfolio, valued at £160m. Apollo may consider a sale-leaseback transaction to monetize this asset and reduce the enterprise value of the operation. However, critics argue that the valuation of TRG, even with the property’s discount, should be closer to 80 cents.

The future of TRG remains uncertain, as shareholders and industry experts debate whether Apollo’s offer truly reflects the company’s value. Regardless of the outcome, TRG’s struggles and Apollo’s interest highlight the challenges and potential opportunities in the restaurant industry.

—————————————————-

Article	Link
UK Artful Impressions	Premiere Etsy Store
Sponsored Content	View
90’s Rock Band Review	View
Ted Lasso’s MacBook Guide	View
Nature’s Secret to More Energy	View
Ancient Recipe for Weight Loss	View
MacBook Air i3 vs i5	View
You Need a VPN in 2023 – Liberty Shield	View

—————————————————-