The Restaurant Group to sell leisured division to Big Table Group for £7.5m

The Restaurant Group plc (TRG) has announced an agreement to sell its Leisure business to the Big Table Group for a cash contribution of £7.5 million. Comprising 75 trading sites and associated restaurant and management team employees, the deal is anticipated to close in early Q4 2023.

Financial and Strategic Benefits of the Transaction

The board of TRG sees the sale as a crucial move in accelerating the company’s core strategic goals, notably in the areas of Adjusted EBITDA margin accretion and debt reduction. According to TRG, the sale will improve their EBITDA margins by more than 100 basis points in FY24 and is expected to be marginally EPS accretive in its first full year. The deal is also set to reduce TRG’s IFRS-16 lease liabilities by approximately £50 million and aims for a net debt/Adjusted EBITDA ratio below 1.5x before the end of FY25.

Andy Hornby, Chief Executive Officer of TRG, commented, “A sale of our Leisure business significantly accelerates our medium-term strategic plans to increase Adjusted EBITDA margins and reduce leverage.”

What This Means for Big Table Group

Alan Morgan, Chief Executive Officer of the Big Table Group, sees this acquisition as aligned with their growth strategy, stating, “This exciting acquisition forms part of that strategy and we are delighted to be welcoming this new team into The Big Table Group.”

Inside the Transaction

The principal brands included in this transaction are Frankie & Benny’s and Chiquito, acquired by Baltra Bidco Limited, a company wholly owned by Big Table Group Limited. TRG is set to provide certain customary services at cost to Big Table Group for a limited period to ensure an operational transition by 31st March 2024.

Financial Terms and Future Plans

While the consideration payable by the Acquiror to TRG is £1, TRG will pay a cash contribution of £7.5 million subject to adjustments. TRG expects minor working capital outflows in FY23 and sees the transaction as a significant move in its deleveraging profile from FY24.

Business Background and Employment

Before its restructuring, TRG’s Leisure business comprised 350 sites and has since been reduced to 75 sites due to market challenges. The division employs approximately 3,000 people, all located in the UK, mainly associated with the Frankie & Benny’s and Chiquito brands. Following the restructuring, the business has improved in food quality, service levels, and customer ratings.

The sale continues TRG’s focus on its three core divisions: Wagamama, Pubs, and Concessions, which have reported strong like-for-like sales and Adjusted EBITDA growth in H1 2023. The transaction will also have no effect on TRG’s responsibility for sites that were previously closed as part of their rationalization plan.