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Private Equity firm Apollo Global to Take The Restaurant Group Private

On October 12th 2023, American private equity firm Apollo Global announced their acquisition of The Restaurant Group (TRG) and their decision to take the firm private. The deal is being advised by Lazard, Centerview Partners and Citigroup for The Restaurant Group, and RBC Capital Markets for Apollo Global. The Restaurant Group, owner of a range of restaurant chains like Wagamama and Frankie & Benny’s, accepted the all-cash deal for £506 million, implying an enterprise value of £701 million at a multiple of 9x adjusted EBITDA. Their shareholders will receive 65 pence per share, at a premium of 34% to the stock's last closing price. Following the announcement, The Restaurant Group’s shares jumped 37% on Thursday to 66p a share.

Apollo Global’s experience in buyouts is reflected adeptly in their $548 billion of assets under management, allowing them to leverage their expertise in the consumer, retail, and hospitality sectors to drive new growth for The Restaurant Group. The private equity firm was in strong belief that TRG’s development would best be served as a private business with a long-term investment approach and access to capital, allowing it to deliver on strategic objectives and respond to structural industry changes in the medium term. The Restaurant Group already operates over 400 outlets in the UK, which Apollo described to be an attractive portfolio of brands in the casual dining market.

The Restaurant Group’s post-COVID recovery has been sluggish, with year-on-year net income being £-38.4m in 2021 and £-68.5m in 2022. Much of this has been attributed to the increasing cost of goods sold as a percentage of sales, despite increasing revenues over the last 2 years. TRG’s Chair placed emphasis on the unpredictably high inflation rate that pushed up costs and caused consumers to pull back on leisure spending. Some of the firm’s largest activist investors, Oasis Management and Irenic Capital, who together own nearly 20% of a stake in TRG, have demonstrated their support of the deal and helped drive it to fruition. These very activist investors had professed their disdain for The Restaurant Group’s management, describing it as a “failure of oversight” which led to a “strategic stagnation” of “one of the worst performing share prices of any UK leisure company”. Apollo Global were highly supportive of TRG’s management strategy and going into the future, they intend to work alongside the existing management as a means to provide sustained growth and development opportunities.

The deal itself was fairly unexpected, yet the opportunities that lie ahead with The Restaurant Group as a private business under the management of a firm as experienced as Apollo Global bodes well for future prospects.

Written by Siddh Patel

Sources: Reuters, TRG press release, The Guardian, Financial Times

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