Ranjit Singh Boparan, the founder of Boparan Holdings, is known as the ‘Chicken King’ for supplying processed poultry and ready-meals to supermarkets. The private owner of the 2 Sisters Food Group, one of the UK’s largest food producers, has revealed an appetite for the restaurant sector over the past few years, especially turnaround stories, but can he pull of the trick again with new acquisition Ed’s Easy Diner, a business that spent the last 18 months fighting declining sales?
So how did it come to this? How can a business that was at one time placed on the market with a valuation of £90m to £100m, end up being acquired through a pre-pack administration, for a sum, I understand could have been as low as £7m? The decline of Ed’s Easy Diner is a harsh lesson of a valuation being based on a pipeline of sites that had yet to open; arguably stubbornness from a management team led by chairman Stephen Greene in regards to the changing valuation of the group; and of an offer that stood still, while the market around them, especially the burger category moved forward at a significant pace.
Back in 2014, Ed’s was riding high. It took top spot in that year’s Zolfo Cooper Growth Tracker, with a CAGR of 127%. It had just opened the 24th site under its core brand and announced plans to grow to 100 restaurants by 2018. A year later, it found itself in the Sunday Times Virgin Fast Track 100. On the back of that, the timing was perfect for the group to review its funding options. In the summer of 2014 the group appointed advisory firm McQueen to take on that role. It was made clear at the time, that the business, valued at c£30m, was not for sale. However, hares were set running and it was expected that a full sales process would begin later this year or as proved the beginning of 2015. Later that same year, the company reported EBITDA of £5.9m in the year to 30 September 2014 and stated an ambition of growing to over 100 sites by 2018.
The group’s expansion rate was fast and its pipeline projections significant. Arguably here is where the company’s problems started, compounded by a slip in the consistency and quality of its offer compared to the wider market. An official process began last year, with CDG and TRG believed to have both shown an interest, before both are believed to have baulked at the valuation, although the fact that the latter was soon dealing with its own issues may have played a part in its interest wavering.
As the year progressed, the likes of private equity firms ECI Partners, Primary Capital, Bowmark Capital and TPG, were all believed to have run the rule over the business, but by this time speculation was increasing that each had found a problem with the performance of a large number of the new openings, which had underpinned the initial £90m price tag, missing their targets. All the while, rivals such as Byron, GBK and Five Guys, were expanding their national presence and re-educating consumers on how a burger-led experience had evolved. Not to mention a trading environment that was becoming “bumpy” for the majority of the sector.
The appointment of Ivan Schofield, as the group’s new chief executive in the middle of the process last September, muddied the waters further, prompting a further redrafting of the company’s business plan.
With suitors now reassessing their offers, some speculated as close to half of the original valuation, the process was finally pulled in mid-February and, just days later, Schofield quit as chief executive. The brief stint by Schofield was meant to be the final piece in the jigsaw to get a deal across the line. But it now looks like Schofield’s swift departure underlined that he was finding it hard to provide substance or put a positive spin on the numbers the business was throwing out. On his departure, Andrew Guy again stepped into the role he had held for five years before the former managing director of KFC Western Europe’s arrival.
Then silence until last month when Guy revealed that the business had considered a partial company voluntary arrangement earlier this year and admitted that the group had expanded to quickly. He said the group was in talks with landlords of three of its 59 sites in relation to handing back the keys to premises.
Less than two weeks later the narrative had changed again, and the group was back on the market and had appointed KPMG to undertake a “rapid hunt for new financing”, while it was revealed that AlixPartners had initially been working with the group to put in place a mezzanine finance package.
I understand that the group’s EBITDA had declined to around £1.5m and that in terms of performance it was facing like-for-like sales declines, with its valuation dropping accordingly. It is also thought that RBS had put c£20m into the business, and on the back of this morning’s pre-pack deal, is set to take a significant bath on its investment, with speculation suggesting Boparan could have paid as little as £6m-£7m for the business, including the brand, head office function and 33 sites out of the 59 units it ended up operating. A full list of the 26 sites that were not acquired by Boparan can be found below and it is telling that many were opened over the past couple of years.
The deal has secured circa 700 jobs, but the closure with immediate effect of the 26 diners will unfortunately result in 379 redundancies. Rob Croxen, partner at KPMG, which has been appointed as joint administrators to Ed’s Easy Diner Group Limited (EEDGL), Ed’s Easy Diner Holdings Limited (EEDHL) and Ed’s Easy Diner Overseas Limited (EEDOL), said: “While we are pleased the transaction preserves around 700 jobs, our immediate priority in the coming days will be to liaise with those employees who have been affected by redundancy and ensure that in addition to receiving all back pay owed, they are provided with any assistance they need.”
The 33 sites will now come under control of the Tom Crowley-led Giraffe business Boparan acquired in another cut price deal earlier this year. It will be unsurprising if Greene and Guy take the opportunity to step aside, although that would leave the relatively inexperienced - in terms of leading a restaurant group – Crowley to oversee the turnaround of not just one, but two underperforming brands. He has already started the process with Giraffe, with the group launching its World Kitchen refresh last month. He will have some building blocks to work from with Ed’s, enough for former Little Chef backer RCapital and Luke Johnson’s Risk Capital to have also shown an interest. Although you would have thought the latter would have had enough of trying to turn around a business with declining like-for-like sales for a while after battling unsuccessfully to right the Red Hot World Buffet ship.
It still has some key locations, Soho and Euston Station to name two, and some fledgling partnerships with SSP and roadside services operator Extra, that should play more to the brand’s strengths – where consumers want a short break and some quick food in a totally different environment. Last month, the company announced a deal with SSP to open an Ed’s at London’s Liverpool Street Station, plus a further 10 sites in UK stations, airports and visitor attractions by 2020. Giraffe is already well versed in the concessions side of the sector. There has also always been interest in taking the brand overseas, but first a period of consolidation will be needed.
Singh Boparan’s Boparan Holdings, which previously ran the rule over Strada before its acquisition by Hugh Osmond’s Sun Capital, now operates 139 restaurants in the UK (52 Giraffes, 33 Ed’s, 44 Harry Ramsden’s, three Fishwork sites and the three-strong Cinnamon Collection), with a handful of other units overseas. It has backed the renaissance of the fish & chip shop brand under Joe Teixeira and is putting £10m behind the expansion of Vivek Singh’s Cinnamon Collection, with a fourth site under new concept Cinnamon Bazaar set to open in Covent Garden before the end of the year.
2 Sisters has been on a five-year long acquisition spree with revenues soaring from £838m in 2010 to £3.4bn last year. Recently, the company acquired Bernard Matthews out of administration, strengthening its grip on the UK’s poultry sector and leading to quips that Singh Boparan had “saved Christmas” through the acquisition of a supplier that accounts for 40% of turkey sales in the country. Singh Boparan has a track record of acquiring struggling concerns and making them work. It is thought he will quickly identify head office costs and buying power opportunities in his new acquisition’s supply lines.
He is known for being very hands on with his businesses. As one City source recently put it: “Ranjit is not just a bruiser; he is very thoughtful about how he addresses how a business can make money.”
The man himself says: “For me, work isn’t work. It’s fulfilling a dream. It is a journey and one where you have to adapt to change, and never stop listening and learning, and set yourself stretching goals.” Ed’s has been on the wrong journey for the last 18 months, let’s hope it isn’t too much of a stretch for Singh, and Crowley, to get it back on track.
Restaurants transferring to Giraffe Concepts Limited:
Basingstoke
Belfast Boucher Square
Birmingham BCA
Birmingham Bullring (SS)
Birmingham Grand Central
Birmingham Selfridges
Bluewater
Brighton Churchill Square
Bromley
Cambridge Extra
Cambridge Grand Arcade
Canterbury
Cardiff
Cheshire Oaks
Euston
Glasgow St Enoch
Gloucester
Lakeside
Liverpool Lord Street
London Victoria Place
Mayfair
Meadowhall
Merry Hill
Metrocentre
Norwich
Nottingham Victoria Centre
Peterborough Extra
Rugby Elliotts Field
Soho
Southampton
Swindon
Watford
York Designer Outlet
Restaurants to close:
Aberdeen Bon Accord
Banbury
Basildon Debenhams
Blackburn The Mall
Blackpool
Bridgend
Carlisle The Lanes
Chester Grosvenor Centre
Crawley County Mall
Derby
Doncaster Frenchgate
Edinburgh Fort Kinnaird
Inverness Eastgate
Islington
Leicester
Livingston The Centre
Luton The Mall
Manchester Debenhams
Plymouth Drake Circus
Reading
Redditch
Trocadero
Wandsworth
White City Debenhams
Woking
York Monks Cross.
