Restaurant Group shares plunge 15% after more than a third of investors oppose £559m Wagamama takeover deal
Shares in The Restaurant Group fell after it won a shareholder vote on its takeover of Wagamama in the face of opposition from more than a third of investors.
The stock closed down 15.1 per cent, or 35.5p, at 199.5p – its lowest level for nearly eight years – amid concerns over the £559million price tag and rising debt.
Just over 60 per cent of shareholders in The Restaurant Group backed the takeover at a general meeting in London while nearly 40 per cent opposed it.
Deal: Just over 60 per cent of Restaurant Group’s investors voted in favour of the deal to buy Wagamama
The lukewarm reception piles pressure on company bosses as they seek to revive its ailing fortunes.
It has more than 500 sites across the UK, and owns Frankie & Benny’s, Garfunkel’s and Chiquito, but sales fell 3.7 per cent in the first half of the year and rival chains such as Jamie’s Italian, Byron, Carluccio’s and Prezzo have shut hundreds of restaurants and axed thousands of staff in recent months.
A string of top investors warned the takeover raises ‘red flags’. Shareholder adviser Pirc said the ‘risks and adverse implications for shareholders appear too great to overlook’.
The Restaurant Group will take on more than £400million of debt as part of the deal.
It also plans to fund the purchase through a rights issue of up to 290.4m shares at 108.5p each – less than half the value of yesterday’s opening price of 235p before the sell-off.
Investors have argued The Restaurant Group needs to turnaround its own business before ploughing ahead with takeovers.
But chairman Debbie Hewitt said: ‘We are confident that the deal will create significant long-term value.
The acquisition of Wagamama creates a raft of new opportunities for us to capitalise on in the months and years ahead.’
Sales at Wagamama, which has 133 sites in the UK, rose 8.5 per cent in the 16 weeks to August 19.
The Asian-inspired chain, which was founded in 1994, is being sold by the private equity firms Duke Street and Hutton Collins.