TRG to acquire Wagamama in £559m deal

The Restaurant Group plc (TRG) has announced that it has conditionally agreed to purchase the Wagamama casual dining chain from Mabel Topco Ltd.

The deal sees TRG pay £357m in cash and assume £202m in debt. It will be funded partly through a £315m cash call on the group's shareholders.

The pan-Asian restaurant brand has 133 operated sites in the UK, 5 in the US and 58 franchised sites across Europe the Middle East and New Zealand.

Wagamama generated £42.5m EBITDA in the 12 months to August 2018, suggesting an acquisition multiple of 13.2x EV/EBITDA.

The Restaurant Group expects to achieve £15m cost synergies and £7m site conversion synergies (at least 15 sites). This would result in an implied multiple of 8.7x EV/EBITDA.

TRG plans to expand the Wagamama chain, which it says is well placed to capitalise on the trend for healthy eating.

Andy McCue, TRG CEO said, 'This transaction is an exciting and transformative opportunity to create a business which can pursue a truly multi-pronged growth strategy and create substantial value for our shareholders.

'Wagamama is a fantastic brand, with a market leading pan-Asian proposition, which has consistently outperformed the casual dining market in recent years. Central to this success has been a cohesive culture and clear brand values which are focused on making the right choices for customers.

'The transaction not only gives us a great brand but also creates a business with a multi-pronged growth strategy which will enhance earnings with continued selective UK rollout, accelerated via conversions of some TRG sites; by further leveraging the brand in Concessions both in the UK and internationally; by maximising the opportunities presented by the rapidly growing delivery sector; and by optimising the potential within international markets.'

TRG also gave its own trading update. After 42 weeks' trade in 2018, total sales were 0.5% down on the comparable period in 2017 and like-for-like sales were 2.2% down. Since the half-year results announcement at the end of August, TRG has continued to make good progress, and like-for-like sales were up 1.4% in the 14 week period following the end of the World Cup.