The Restaurant Group presses on with Wagamama buy

Frankie & Benny’s owner The Restaurant Group on Monday pushed ahead with a rights issue to help fund a £559 million takeover of Wagamama, despite City concerns about the purchase of the noodles chain.

The Restaurant Group, behind the Garfunkel’s and Chiquito brands, also provided new trading figures as boss Andy McCue sought to convince critics that a deal for the Asian-themed business is “transformative”.

It outlined its plan to tap shareholders up for £315 million towards the deal. The rights issue will be underwritten by JPMorgan.

That comes despite some analyst and investor concerns since The Restaurant Group two weeks ago said it planned to buy the firm, founded by restaurateur Alan Yau in 1992, from private equity firms Duke Street and Hutton Collins.

There are worries about a potential rights issue dilution, weaker consumer confidence in the eating-out market and taking on more debt.

McCue said: “This a transformative deal which accelerates our growth strategy and adds a differentiated, high-growth brand to our portfolio.” He added he is eyeing £22 million in cost cuts from the deal.

The City appeared to be unimpressed, and shares in The Restaurant Group fell 9.2p to 242.6p.

Liberum analyst Wayne Brown said: “Does TRG need this deal? Probably not, and we baulked at the price when originally announced.”

The Restaurant Group revealed comparable sales in the first 42 weeks of this year are down 2.2%, but up 1.4% since the end of the World Cup in July.

At Wagamama, sales at sites open for a year or more surged 12.2% in the 11 weeks to November 4.