Oasis Management Company has called on The Restaurant Group (TRG) to take “immediate steps to restore market confidence”.
The investor, which manages private funds that beneficially own around 6.5% of TRG’s shares, said it considered the group’s three capital raises over the past five years – “whilst markedly underperforming sector peers” – as failing to deliver value to shareholders, propagating low market confidence and unattractiveness to new investor capital.
Since the close of the latest of these rounds, in March 2021, the share price has fallen by approximately 65%, reducing the company market capitalisation to around £265m – half of the combined £547m proceeds raised.
It has said the group needs to communicate its strategic direction to the market and means of value creation. “Further to this, it should engage with shareholders on all options for meaningful governance change in the near-term to promote this value creation and alignment with shareholders,” it said.
Oasis added that it had been engaging with TRG for several years based on a firm belief that it possesses a strong portfolio of core assets, including Wagamama and Brunning & Price. Despite this it said that TRG had one of the worst performing share prices of any UK leisure company – “materially worse than its closest peers, and disproportionately worse than what the impact of the challenging sector backdrop would alone justify”.
It blamed the decline on “group level decision-making and failure of oversight by a Board that has lost focus on long-term value creation and its alignment with the shareholder perspective”.
Oasis believes there is a compelling rationale for significantly improved board-level oversight and strategic guidance at TRG, but said that when it conveyed this message to the group it has “thus far been rejected out of hand”, prompting them to open the discussion publicly.
In response to the claims, TRG said the board noted the letter issued by Oasis and welcomed constructive input from all shareholders that is supportive of the creation and delivery of long-term sustainable shareholder value.
TRG said that its chairman had only met Oasis face-to-face for the first time in December 2022, at which point they requested a seat on the TRG board and a strategic review be conducted by an “independent bank”, with no indication given as to the strategic ideas to be examined.
“The Board was already, and continues to, review the Group’s strategic options. The Board concluded that this review should not be disrupted by Oasis’ suggestion of an additional process,” read a statement from TRG. “The Board therefore decided it would not be in the interest of our other shareholders to grant Oasis a Board seat.”
TRG also disputes the claims that Oasis has a c.6.5% shareholding and said it was notified on an increase to c.5% in November last year.
It added that the group’s operating performance has been strong since Covid, when compared to the wider UK casual dining market, with Wagamama and Brunning & Price both trading strongly.
“The Board continues to examine options to ensure that the strength of the Group’s operating performance generates shareholder value,” it added.
TRG will announce its full year results on 8 March 2023.”
