Prezzo gobbled up for £304m by American private equity firm TPG

Prezzo yesterday agreed to a £303.7m cash bid by American private equity firm TPG, valuing the high street Italian restaurant chain at almost 10 times its operating profit.

 

TPG, which saw off competition from buyout firm Advent to seal the deal, launched the offer via Papa Bidco, a newly incorporated company indirectly owned by the private equity firm.

 

Papa Bidco will pay 126.50p in cash for each Prezzo share, valuing the  business at 9.9 times its adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) of £28.9m in 2013, or 9.2 times its adjusted Ebitda of £31m in 2014. Prezzo’s directors, who were advised by Altium, unanimously considered the terms of the transaction to be “fair and reasonable”, with chairman Michael Carlton saying that the offer “is in the interest of all shareholders”. 

 

He added: “Since the business was founded in 2000, the Kaye family and management have built Prezzo into a successful UK casual dining business with 249 restaurants. To continue to maximize the growth of the business, the board has concluded that new skills, infrastructure and investment will be required and we are pleased to recommend the Bidco offer.”

 

Prezzo listed on Aim in June 2002. The Kaye family owns around 48.5 per cent of shares, and other directors, with 13.8 per cent of shares, have already given their support to the offer.

 

However, Peel Hunt analyst Nick Batram said that “the agreed bid of 126.50p [per share] fundamentally undervalues a business with an impressive track record and exciting prospects”.

 

He added that “independent shareholders should be disappointed at the exit price, and for those that can hold unquoted equity, they should reject the bid”. 

 

The Kaye family is also known for its role in creating Zizzi and Ask, two other high street Italian restaurant chains, which were sold in 2004 to Gondola Holdings.