Appetite grows for restaurateurs

3rd Sep 2010 17:48

Much of Britain's restaurant trade had a tough time of it during the recession, as evidenced by the proliferation of two-for-one dining offers and other promotional inducements, but judging by mergers and acquisitions activity in the sector better times are just around the corner for restaurateurs.This week the board of Carluccio's, the Italian-themed restaurant chain that specialises in al-fresco dining, gave its backing to a £90m takeover approach from Dubai-based conglomerate Landmark Group. The bidder already has a 5.1% stake in Carluccio's.The 142p per share cash offer certainly spiced up the share price, which was languishing below 100p before the bid announcement. In aggregate, Landmark holds, or has received irrevocable undertakings or letters of intent to accept the offer, in respect of some 36.5% of the existing issued ordinary share capital of Carluccio's, which ordinarily would mean the deal is done and dusted. However, the company's largest shareholder, Richard Caring, who owns 12% of the company's shares, has yet to indicate whether he will accept the offer.Elsewhere on the high street Clapham House, owner of the Gourmet Burger Kitchen and The Real Greek chains, is mulling over an approach from a potential bidder, widely believed to be Capricorn Ventures (CVI), the group that owns the Nando's peri-peri chicken chain. CVI is said to have offered 69p per share valuing the restaurateur at £28m. Capricorn has steadily built up a 27% stake and Clapham's chief executive Paul Campbell forecast last year in an interview with Sharecast that a takeover could be on the way.Campbell also said in that interview that Gourmet Burger Kitchen was, in his opinion, the last new restaurant format that could justify the roll-out of some 500 outlets nationwide. That may be over egging it a bit but could explain why there is so much interest at present in buying up established restaurant chains that are still in a growth phase.Campbell was also of the view that well capitalised companies are well positioned to take advantage of landlords' reduced rental expectations for new properties and leases. One restaurant format that could well be capable of growing to the sort of size currently enjoyed by the likes of PizzaExpress is Wagamama, the pan-Asian cuisine chain. It already operates in more than 60 locations in Britain and Ireland and also has restaurants as far afield as Australia and Dubai.The chain's owner, Lion Capital, has instructed investment bank Rothschild to find a buyer for the business, which suggests that the private equity company has picked up on the increased appetite for restaurant stocks.Rumours are also circulating that the Restaurant Group, owner of the Chiquito & Frankie & Benny's chains, is being stalked by a bidder. The shares were trading as low as 210p at the beginning of July and are now close to 260p, although part of that rise can be explained by Thursday's interim results, which served up an increased portion of profits.Profits were up at the Frankie & Benny's chain, which consists of 189 restaurants, but were slightly down at Chiquito, which has 64 outlets. The pub restaurant business, with 42 units, saw profits increase and Garfunkel's, the central London focused restaurant chain with 23 units, 'performed superbly,' according to the company.Even in the recession the trend towards eating out more often has continued growing, though there has been a tendency to trade down. Clapham House's Paul Campbell observed that Britain still has a long way to go before it catches up with the US in terms of how often people dine out, so there is plenty of scope for growth.The companies circling the established low-to-mid-range restaurant chains seem to concur with Campbell's assessment, though with the major pubcos such as Greene King, Marston's, Mitchells & Butlers and Fuller's muscling in on the dining out business there is no guarantee that the established high street and retail park names will have it all their own way.