Is Paramount Caring's next play?

There are a number of auctions underway in the sector right now. In the casual dining space, the big ones are La Tasca and Paramount. Not big in the quantum that will be paid, but big in that they are high profile and say a lot about the not entirely painless journey some businesses have been on through the recession. Both La Tasca and Paramount are symbols of the largess of a previous era – of the high prices paid, and to varying degrees, how it all went wrong. La Tasca was, three years ago, sold for £123m at a time when it was producing annual underlying profits of more than £14m. The price was the result of a highly competitive auction for a growth business by two well-financed, strategic bidders in Robert Tchenguiz and Tragus, and testament to a buyer in Tchenguiz who refused to be beaten. Now, up for sale again, La Tasca is producing just over £9m. That’s quite a slide, although it’s the current rate of profit decline that is said to be alarming would-be buyers the most. In the interim between sales it has been the subject of a pre-pack as part of Laurel, its ensuing expansion has been decidedly mixed (to put it politely), the brand has engaged in deep discounting and a tough trading period and lack of investment has seemingly taken its toll. There are thought to be two private equity houses leading the bidding at £45m. It remains to be seen if the current owners – Kaupthing and Commerzbank – are prepared to do business at that level. Paramount is a similar tale of woe – one of arguably secondary brands, struggling under the weight of mountainous debt, which resulted in the providers of that debt taking control of the business, at the expense of its private equity owners, a situation mirrored at various other companies across the market. The auction of 37 sites that trade under a raft of Paramount brands such as Brasserie Gerard and IL Bertorelli is also interesting in that it includes a clutch of prime London leasehold pitches rarely available. There are said to be three bids in for the entire package. These are thought to be Tragus, Gondola…and Richard Caring. If this is the case, then the far more obvious buyers in Tragus and Gondola will fear bridesmaid status in this process, for the usual rules do not seemingly apply to Caring. He is someone who can spend more money raising a few greens and shifting some tees on a golf course in Surrey, than most companies in the sector invest in their business on an annual basis. He has a track record of paying whatever it takes – in a recent interview, he admitted to being a bad purchaser of businesses, because of his penchant for buying businesses based on emotions rather than economic sense: he can’t walk away from something he wants. From Tragus and Gondola’s perspective he is a pretty good purchaser – in that he normally wins. He also seems to be making sense of what he’s got. In all, he has spent about £500m in the past five years amassing his restaurant and club empire. Underlying profit (ebitda) was £65m last year and Caring believes the number will top £80m this year. But just what is he up to with Paramount? The move would fortify his position in central London. If he does emerge as the successful buyer, we can expect to see more fine dining restaurants in the West End, more Cote eateries, a couple of Bill’s Produce stores, not to mention the odd café-meets-deli format in the mould of his recently-unveiled venture on Mount Street, in London’s Mayfair (www.themountstreetdeli.co.uk). What he would do with the more challenging sites in Barnet and Enfield remains to be seen. Caring, who amassed his wealth supplying clothes to British retailers, notably Sir Phillip Green’s fashion empire, aims to build the first global restaurant-and-club business. “We own the crown jewels of the UK. They can travel,” he told The Sunday Times. All eyes on the budget It is a massive week for the leisure sector. Let’s hope that the sunny weather will be accompanied by a proper performance from the England football team this Wednesday rather than the abject display of Friday night in Cape Town. For if anything can keep people spending in the eating and drinking-out market in the face of VAT at 20% and National Insurance increases, it might be some sunshine and a transformation in the prospects of the national football team. With the chancellor George Osborne in his first budget tomorrow expected to outline his vision of a new period of austerity – £40bn of spending cuts, with an immediate freeze on the pay of state employees and the slashing of middle-class benefits payments – we could all really use a little piece of the feel-good factor.