Restaurant Group shareholders voice anger over £600m Wagamama price tag

Nervous investors have raised concerns over the price of the Restaurant Group’s (TRG) proposed £600m acquisition of Wagamama as a major shareholder announced its intention to vote against the deal.

Columbia Threadneedle, which owns 7.7 per cent of TRG, will oppose the proposal at a shareholder vote next week, it announced today.

Frankie and Benny’s owner TRG is the preferred bidder in the sales process for the Asian fusion restaurant chain which was sparked in June by Goldman Sachs on behalf of private equity backers Duke Street and Hutton Collins, it was announced last month.

Columbia Threadneedle Investments UK equities fund manager James Thorne said: “The strategic appeal of combining two good businesses may be understandable, but the size and price of the deal at this point in the cycle throws up too many red flags.

“The share price plunge reflects the depth of concern there is.”

Grizzlyrock Capital and Vivaldi Asset Management, which collectively hold 1.9 per cent of shares, have also announced their opposition to the deal.

Another major investor told Morning Wire it is in talks with the company over concerns about the price as it deliberates over the final decision.

AJ Bell investment director Russ Mould commented: “The valuation looks full and they are paying a big premium to the price at which the current private equity owners bought Wagamama a few years back.

“Restaurant Group’s description of the deal as ‘transformative’ is a give-away here as that is sometimes code for ‘we know we may be overpaying for this asset but we really, really want it.”

However, despite investor concerns, influential proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis have recommended that shareholders pass the proposals on 28 November.

ISS said there is strong strategic rationale in support of the acquisition and said the valuation is reasonable, however noted a substantial negative market reaction due to the size of the deal while the group is still in turnaround mode. Glass Lewis added that the deal is “generally reasonable and in the interests of shareholders”

Top five shareholder J O Hambro has come out in support of the transaction.

Last week TRG chief executive Andy McCue said: "This a transformative deal which accelerates our growth strategy and adds a differentiated, high growth brand to our portfolio.

"The transaction benefits both businesses, creating an enlarged group that has scale benefits and will create significant value for our shareholders, underpinned by £22m of quantified cost and revenue synergies.

"We look forward to welcoming the Wagamama team into the Restaurant Group."