TRG should ‘just own Wagamama’

The Restaurant Group should sell all non-core assets, and focus on growing Wagamama, shareholder Irenic Capital Management has said.

The New York-based investor, which described itself as a substantial shareholder of The Restaurant Group, described the acquisition of Barburrito as “ill-advised”.

The fund said ultimately TRG should “just own Wagamama and focus its efforts on growing that business”.

Irenic’s intervention is the second activist investor to put pressure on the Andy Honrby-led management team and calling out its remuneration policy, which it said did not incentivise unlocking value at the group.

“We believe Mr. Hornby is capable of unlocking the substantial value that exists at The Restaurant Group. But unfortunately, the current remuneration plan provides little incentive to do so. In fact, it does the opposite. Under the current remuneration plan, the only direct financial incentive for Mr. Hornby is to increase overall profits at the enterprise – irrespective of the capital employed to do so. This encourages ill-advised acquisitions (Barburrito) and provides a disincentive to make the hard but necessary decision to sell non-core assets – and use the proceeds to de-lever.

“Ultimately, The Restaurant Group should own just Wagamama and focus its efforts on growing that business. We have urged Mr. Hanna [Ken Hanna, chairman] and the Board to design a Remuneration Policy that encourages Mr. Hornby to get to this end-state as quickly as possible. Should the Remuneration Committee adopt such a policy in the future, we would support it.

“The path forward at The Restaurant Group should be clear. Dispose non-core assets, de-lever, and grow Wagamama – a brand that has excellent unit economics and a substantial global runway. Performance of The Restaurant Group’s non-core assets has rebounded from the depths of COVID-19 and financing markets are open. There is no reason for further delay in an asset sale program. It is time to get on with it.”