Leading analyst Nick Batram at Peel Hunt has said that Prezzo shareholders should reject the agreed £303.7m bid from TPG Capital because 126.5p fundamentally undervalues a business with an” impressive track record and exciting prospects”.
He said: “We appreciate the risks of the family exiting and TPG have been very cute and picked up a good business at an attractive price. However, independent shareholders should be disappointed at the exit price and, for those that can hold unquoted equity, they should reject the bid.”
“The offer price represents an EV/EBITDA multiple of c8.7x to Dec 2014E, falling to 7.6x Dec 2015E, based on our forecasts. This represents a c20% discount to the Restaurant Group. The reason given for accepting the bid is the risk to the business and the share price if the Kaye family were to exit through the public markets.
“There is also some comment on the requirements of developing the business to take it to the next level. These are both valid concerns/challenges. However, independent shareholders should still feel disappointed at the level of discount for a business with an impressive track record and attractive future prospects.
“There is no doubt in our minds that TPG has secured Prezzo at a very attractive price – great news for TPG investors, not so good for independent shareholders. However, history has shown that independent shareholders that have been able to hold unquoted equity have done well rejecting unattractive bids in the past (Fitness First is a good example). Therefore, for those that can, we would reject the bid.”
