Inside Track by Peter Martin
Just a year ago talk of taking a pub or restaurant company to the stock market would have been laughed at. The speculation was all about which quoted operators would quit the market, not join it. The City has been starved of IPO activity in the hospitality sector, so it was not surprising that Ian Neill phone at Wagamama’s head office was red hot on Friday morning. An article in the Daily Express quoted Neill, the chain’s chief executive, as saying that a stock market float was now an option under consideration. The story implied the company was seeking £40m to £50m for its 22 noodle bars and that it was already seeking advisers. No wonder City types were quick to look up Wagamama’s number in search of a piece of the action. What Neill said was that as a company 60% owned by private equity investors a float was one of three future alternatives for the business – along with a trade sale and staying as it is. Not an unreasonable analysis, but such is the appetite for action that the excitement levels rose rapidly. The important fact is that a stock market float was actually one of those three options. IPOs really are back on the menu for any business looking at potential exits. It says much about the health of the stock market, the buoyancy of the restaurant market in particular (pubs may still have a few more hurdles to jump), public equity’s rekindled interest in the sector, or at least profitable operations within it, and the fact that managements now recognise those shifts in sentiment. Last month, Tim Bacon boss of Living Ventures, which runs the Living Room, Prohibition and Mosquito Bar businesses, attracted similar interest when he too suggested that a float might be an option for his company. There are one or two others that might also now see an IPO as a viable alternative to a sale or more private equity involvement. The confidence in the public markets currently shown by the Restaurant Group (formerly City Centre) and Paramount, owner of Chez Gerard, and the returns that shareholders in Ask Central will see whoever ends up buying it all augur well for market-driven deals. It is worth noting that Ian Neill is a non-executive director of Paramount. So who’s going to open the book on which company will be the first to take the IPO route this year? The other tantalising question, of course, is who in the City is going to admit to reading the Daily Express?