The Restaurant Group (TRG) is believed to be weighing up a potential sale of its pubs business Brunning & Price, following pressure by activist investor Oasis Management Company to demonstrate greater value for its shareholders.
The speculation, reported by The Times, follow suggestions that a major pub operator has approached a corporate adviser, understood to be PwC, regarding a restructuring deal or an asset sale, according to analyst Peel Hunt.
According to The Times’ Dominic Walsh, private equity firms are reported to have been running a preliminary slide rule over the business, with one City source claiming that former Wagamama chief executive David Campbell has been sounded out by at least one suitor about becoming involved in a break-up.
Last month, Oasis, which has a 6.5% stake in the business, called on TRG to take “immediate steps to restore market confidence”.
It 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.
Peel Hunt said it believed TRG’s Pubs division, which includes Brunning & Price’s 80-strong estate, could be worth £230m - enough to wipe out TRG’s £184 of debt.
“Per the company’s last presentation, B&P’s average new site EBITDA is £350-600k. However, that is new sites. Part of the estate, such as Brubeckers, is less profitable. At site level, a £300k average for the entire Pubs division is sensible for 2023E, and possibly £350k as energy costs come down,” it noted.
The analyst questioned how keen TRG’s management team would be to make the company smaller by removing one of its growth engines, but added: “Nevertheless, it is encouraging for the sector that it appears corporate activity is finally back on the agenda.”
