Restaurant Group gained approval from its shareholders for its £550m acquisition of Asian food-chain Wagamama, but around 40% of its stockholders voted against the deal.
The company will acquire Wagamama from its private equity owners Duke Street and Hutton Collings, with it hoping that the noodle chain will continue to see strong sales growth after paying such a high premium and in a particularly challenging casual dining market.
Casual dining feels the pressure
This year has been a particularly challenging time for casual dining chains, with consumer spending on the decline, a by-product of a UK economy that appears to be cooling down.
The sector has also been hurt by rapid expansion that has not grown in-line with demand, leading to chains like Prezzo, Gourmet Burger Kitchen and Jamie’s Italian all becoming strapped for cash and forced to make take cost-cutting measures.
Wagamama’s growth story
Duke Street acquired the London-based noodle chain back in 2011 in a deal that was valued at approximately £215 million, with the private equity firm mandating Goldman Sachs to sound out to strategic buyers earlier this year.
The decision to sell came at a time when the casual dining market in the UK has struggled as consumers spend less on eating out, with several rivals in the sector, including Jamie Oliver’s chain of Italian restaurants forced to make cut backs.
Despite the backdrop of challenging market conditions, Wagamama has continued to post strong results, with revenue growth of around 13.3% in 2018 to £307 million, up from £266 million a year ago.
‘Wagamama is a fantastic brand, with a market leading pan-Asian proposition, which has consistently outperformed the casual dining market in recent years,’ Restaurant Group CEO Andy McCue said after announcing the takeover in late-October.
‘Central to this success has been a cohesive culture and clear brand values which are focused on making the right choices for customers,’ he added.
In a trading update, TRG announced that after 42 weeks of trading in 2018, total sales were down 0.5% when compared with the same period last year and like-for-like sales were 2.2% down.