After a relatively slow start to the year, momentum behind M&A in the sector is starting to pick up, with the sales processes of La Tasca and Las Iguanas moving up a gear. Consolidation of the market place is high on the agenda and two renamed but long-established operations (the former Tragus and Gondola vehicles) are looking to play key roles.
Soon after the formation of Stonegate Pub Company, after its acquisition of 333 wet-led sites from Mitchells & Butlers, chairman Ian Payne said the newly formed company would look to lead consolidation of the high street pub and bar market. The statement has been used to place Stonegate’s name against every process that has run since. Steve Richards, chief executive of Casual Dining Group (CDG, nee Tragus), now finds himself in a similar position.
Richards has been very open about the fact that his new charge (and the name change hardly understates the point) will look to add one or even two new strands to its current success Bella Italia and turnaround in progress, Café Rouge, brands. In an almost classic reshuffling of the squad, the disposal of Strada, which was treading water, has left a gap that the business feels it needs to fill to get back to full strength.
While Richards is keen to stress that the group is focusing on organic growth for the time being, he hasn’t ruled out acquisitions especially as the company eyes its longer term goal of operating c500 sites and has a management team in place, including Andrew Walker, ex-UK managing director of Pret A Manger, that warrants a more significant business to operate.
As I pointed out in March, future targets could include the likes of Ed’s Easy Diner, Las Iguanas and La Tasca, and it is unsurprisingly the latter, which the company is now being linked to. It is a brand that has some momentum behind it and a chief executive that Richards knows well, with Simon Wilkinson having previously worked under him at Spirit, where the latter was the head of the group’s branded food division.
Wilkinson has enhanced his reputation at La Tasca, bringing a broken business back from the brink of extinction and placing it on an even keel and, where investment has taken place, growth. He will hand over a business on an upward curve and have options in regards to his next move.
The Spanish restaurant and bar group’s other suitor is Prezzo, which fresh from its c£300m takeover by TPG Capital is reportedly looking to make further inroads into the sector. Previous to TPG’s investment the Jonathan Kaye-led group had a long, hard look at Strada, but decided against firming up its interest in the business, it was then linked to a play for ASK and Zizzi before Bridgepoint stepped in.
Its interest in La Tasca, similar size and in some respects back story as Strada, comes at a time when it is thought that its core brand is continuing to perform well, but that its sub Mexican brand Chimichanga has started to drop off after a period of strong trading 18 months ago, which led Kaye to comment that the brand would take up a greater proportion of its site openings split going forward
Whether it’s a rejuvenated Chiquito or a move by consumers towards the more fast-casual world of the burrito bar operators, the decline has seen the group pull back on its growth plans for the brand and place a number of sites on the market. A similar story can be found with its fledgling Cleaver format. There is also the continuing question mark over how long Kaye will continue to lead a business he spent 11 years developing. Would it continue La Tasca as is, or look to convert sites, I would imagine a mixture of both.
The other game in town is Las Iguanas, which has been quietly examining its options since last year, when it had to abort one sales process before it even got to the start line after the departure of chief executive Steve Hill. Under new managing director Mos Shamel, the company has continued to grow sales, expand its national reach and collect awards for its people-led development. Backer Bowmark Capital, which acquired the business for c£30m in 2007, has always indicated it would look to exit around the 40-site mark and the company moved through that milestone recently with further openings in the pipeline.
A deal for Las Iguanas is expected to be completed by the end of June, with private equity leading the way in the c£100m process. A couple of interesting names have been linked with the group, which at one point last year was touted as a follow up acquisition on the back of the purchase of the UK arm of TGI Friday’s. Graphite, the backer of Hawksmoor and Corbin & King, has been mooted as a possible suitor and it is thought that the company is looking to add a further brand from the sector to its line up. It previously ran the rule, along with many others, over Honest Burgers.
Perhaps the most interesting is Bridgepoint, the new owners of ASK and Zizzi, and backers of Pret A Manger. Now operating under the vehicle the Azzurri Group, Las Iguanas might not seem the obvious choice to become part of that family, but the wet-led strength of the brand might prove a nice counterpoint to the group’s two current Italian-led brands, which have been re-energised under the understated leadership of Stephen Holmes.
As an aside, I wouldn’t rule out Bridgepoint looking to crystalise its stake in Pret over the come year to 18 months, whether that is through an outright sale or, more likely, an IPO. On the back of record results, the brand is starting to stretch its legs further globally and in the UK, with the trial of an evening offer, something I hear that it has been toying with for a number of years. There is also the subtle shift in the raising of chief executive Clive Schlee’s profile. Schlee has embraced social media over the last few months, complete with a couple of blog posts and is now more comfortably talking of the brand in terms of a global proposition.
Finally, of those that are definitely in play (we await Bill’s and YO! to firm up their plans), Ed’s continues to produce impressive figures and a growing pipeline. A succession plan for chief executive Andrew Guy is now being worked on (pointing more toward a private equity sale, after TRG is thought to have shown an interest in the shopping centre-focussed group) and an international play is weeks away from being unveiled. Judging from the number of private equity players currently circling the market place it won’t be short of suitors.
It may have taken a while to warm up, but the sector is coming to the boil nicely.
