TRG to sell loss-making Frankie & Benny’s business
- As part of the agreement, TRG revealed that it will pay Big Table Group £7.5 million
- The transaction is expected to close in early fourth quarter 2023.
Wagamama owner The Restaurant Group (TRG) has agreed to sell its leisure business to Cafe Rouge owner Big Table Group in a bid to improve profits and reduce leverage.
TRG will sell the loss-making unit, which houses the Frankie & Benny’s and Chiquito brands, in a deal that will see it pay £7.5m to Big Table Group.
TRG told investors that the sale will increase adjusted earnings before interest, taxes, depreciation and amortization margins and reduce leverage.
As part of the deal, TRG will pay Big Table Group £7.5 million to take over its loss-making leisure business.
The sale will include 75 commercial sites within the leisure business.
Earlier this year, the restaurant chain revealed it would close up to 35 locations over the next two years.
Loss-making branches will be closed as the company tries to cut costs.
In a statement, TRG said so expects to exit most lease obligations for the recently closed sites by the end of FY24.
“We would therefore expect the remaining liabilities and expected cash outflow from the closed sites (the majority of which are currently subleased) to be no more than £1-2m a year from FY25 onwards. “he added.
‘The consideration payable by the purchaser to the group on completion of the sale is £1.
“In addition, TRG will pay a cash contribution of £7.5m, subject to certain cash, debt and working capital adjustments, and there will likely be a minor working capital outflow for TRG at the end of FY23.” .
The transaction is expected to be completed early in the fourth quarter of this financial year.
TRG’s latest interim results show sales in the leisure business fell 3 per cent year-on-year on a like-for-like basis in the 34 weeks to August 27.
Andy Hornby, chief executive of TRG, said: ‘The sale of our leisure business significantly accelerates our medium-term strategic plans to increase adjusted EBITDA margins and reduce leverage.
“On behalf of TRG, I would like to express our enormous gratitude to the extraordinarily hard-working and dedicated teams across the leisure business who have made huge improvements to the customer proposition over recent years.”
Last week, TRG revealed that Chairman Ken Hanna would be stepping down, amid pressure from investors for him to step down.
Hanna said he will not seek re-election next January at the company’s annual general meeting, citing “personal reasons.”
Alan Morgan, CEO of Big Table Group, added: ‘Creating, developing and acquiring brands that complement our existing portfolio while delivering widespread consumer appeal is a key part of our growth strategy.
“This exciting acquisition is part of that strategy and we are delighted to welcome this new team to The Big Table Group.”
The restaurant group shares They rose 5.89 percent to 50.30 in early morning trading on Monday.
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