Apollo to take Wagamama owner Restaurant Group private for $623 million

By Eva Mathews

(Reuters) - Wagamama owner The Restaurant Group has agreed to be taken private by private equity firm Apollo Global for 506 million pounds ($623.44 million) after a year of financial struggles and investor pressure.

Under the terms of the deal announced on Thursday, The Restaurant Group's (TRG) shareholders will get 65 pence in cash for each share held, a premium of about 34% to the stock's last closing price.

Shares in the small cap constituent jumped 37.1% to 66.5 pence, its highest percentage gain since April 2020.

Over the past year, the group, which owns about 400 restaurants and pubs across the UK, has struggled with falling margins amid soaring costs and sluggish recovery post-pandemic.

There has also been pressure from shareholders and activist investors Irenic Capital and Oasis Management in recent months to change management and improve profitability.

In Thursday's announcement, the companies said they had received undertakings from both investors, who together own a nearly 20% stake in TRG, to vote in favour of the deal.

Chairman Ken Hanna agreed to step down last month, after the company forecast higher annual profits. TRG, which owns popular Japanese noodle chain Wagamama, also agreed to sell its loss-making Frankie & Benny's and Chiquito brands to Cafe Rouge owner Big Table Group, as part of efforts to bolster margins and cut debt.

The company's board has unanimously recommended that shareholders vote in favour of the deal, which has an enterprise value of 701 million pounds and is expected to be complete in early 2024. Apollo previously put forth about three buyout proposals for TRG.

US-based Apollo said it believes that the development of the company will be best served as a private business, with access to capital and the benefit of a long-term investment approach.

"We understand that this was an unsolicited approach, so it is possible that it flushes out another bid," Stifel analysts said in a note, adding that they, however, expect the deal to go through.

Another analyst at Shore Capital said the offer price was "too low" given the company's efforts to improve margins and reduce leverage.

($1 = 0.8116 pounds)

(Reporting by Eva Mathews in Bengaluru; Editing by Subhranshu Sahu and Elaine Hardcastle and Miral Fahmy)