Knowing when to go for plan B

The Restaurant Group is ready to walk away from its £168m offer for the Ask restaurant business if the promised counter bid from TDR Capital materialises On Friday, TDR, the private equity house that owns a major slice of PizzaExpress, said it was preparing an all cash bid that would value Ask Central, with its Ask, Zizzi and Jo Shmo brands, at £212m - a cool 20% above The Restaurant Group’s share and cash offer. If TDR’s premium intervention was designed to see off TRG, the company previously known as City Centre Restaurants, it is likely to have succeeded. Many in the City believe that The Restaurant Group could and should come back at TDR, boosting the share component to its bid. But at around £1.4m a site, it is a price that now looks too rich. It now only remains for TDR to match its words and come up with the cash to take the goods. The Restaurant Group has been producing some robust figures, particularly from its Frankie & Benny’s brand based mainly on retail parks, and may now look to alternatives to fill the gap in the high street that the Ask acquisition was designed to fill. TRG will be disappointed but not desolate at losing out on Ask. TDR’s bid is seen as being an essentially defensive move. The prospect of seeing Ask grow even more rapidly, backed up by TRG’s own High Street businesses such as Caffe Uno and Garfunkels, seems to have been seen as too much of a threat to its own PizzaExpress business. It looks as if PizzaExpress is still having a challenging time and not benefiting from the uplift in eating-out that is boosting many other parts of the market. TDR joined forces with Capricorn Investments, owner of the Nando’s fast casual chicken chain, last year to pay £278m for PizzaExpress – a deal that at the time looked a steal. The price tag on Ask is far less of a bargain, but TDR and Capricorn have now emerged as the major player in High Street eating out and the consolidator in chief. This will be a threat to The Restaurant Group’s business unless it can come up with a Plan B. TRG has shown with its Ask plan it has the ambition and funds to grow its business. Other chains will surely now be in its sights to bring both proven concepts and management skills into the fold. Private equity owned operations such as Tootsies, Strada, even Carluccio’s, could measure up. Tootsies, the grill restaurants owned by the Piper Trust, will soon be looking for an exit. Strada is now rated as perhaps the best pizza and pasta operation in London, and Carluccuio’s probably the most stylish High Street chain. There are also one or two bigger bar restaurant chains that might also fit the bill. The Ask episode looks to have kick started a round of M&A activity in restaurants, although the TDR valuation will encourage sellers and ensure bargains will now be few and far between.