The battle for La Tasca

Beware a billionaire scorned. Robert Tchenguiz had clearly had enough of being the bridesmaid in auctions, judging from his reaction to missing out on La Tasca Group. Slighted by the board in favour of a lower offer by Blackstone-backed Tragus Holdings, the Iranian property investor went public with what was effectively a hostile bid last week, offering £118m for the group, against Tragus’s £116m. The La Tasca board insisted that an offer had failed to materialise from R20, although Tchenguiz said his company had made clear its intention of making a cash offer at 190p per share, 5p higher than Tragus’s agreed bid. And there was clear irritation that the deal with Tragus included a £958,000 inducement fee. One R20 insider – possibly Tchenguiz himself – told the Times newspaper: “We told them we’d offer 190p if they agreed to an inducement fee and were told they didn’t pay inducement fees. We worked through the night with the aim of making an offer only to see a deal with Blackstone announced.” So, working in concert with Kaupthing, the Icelandic bank, Tchenguiz went hostile, with an offer worth just £2m more. Tragus look now to have regained the initiative, having responded late on Friday with an improved agreed bid of 192p, valuing the group at just under £120m. It will be interesting to see if Tchenguiz responds. It is not the first time Tchenguiz has missed out. The entrepreneur, who owns Laurel Pub Company and 16% of M&B, missed out to Punch Taverns in the auction for Spirit Group, despite again making the highest offer. Maybe vendors are electing for speed and surety of delivery as much as value. Tchenguiz does also have a reputation, deserved or not, for chipping away at the price. With irrevocables for more than 30%, and a higher offer, Tragus now looks favourite to consolidate its position as a key player in the casual dining market. The deal will create a 240-strong company – similar in size to The Restaurant Group – with neat French, Italian and Spanish divisions. What Tragus does with La Tasca’s fledgling US operation is uncertain. Writing in the latest issue of M&C Report, out this week, Dominic Walsh suggests that La Tasca CEO James Horler is already undertaking a review of the division. As for Horler, it seems unlikely that he will be at Tragus for anything longer than a brief handover. He has done a good job. Having bought the business in September 2001 for £27m, he led the float at 110p, and has added almost £100m to its value in less than six years. Presumably Horler will look for the next scalable eating-out concept. There will be no shortage of people ready to back him. It will be interesting to see what is next on the Tragus menu. It is clearly a force for consolidation. Although not of the same scale, one that Tragus (or Horler?) will want to look at is Las Iguanas, the South-American bar-restaurant concept, led by entrepreneurs Eren Ali and Ajith Jaya-Wickrema. This high-quality concept has a long way to go. It has been backed for five years by Piper Private Equity, and will almost certainly be refinanced within the next 12 months. And what of the dwindling numbers of quoted restaurant groups? The public markets are becoming more and more of a niche habitat for this sector. For those that want access to public funds to facilitate rollout, such as Clapham House, Dim T operator Tasty and Prezzo, the public markets continue to work. This is after all the most important function of the stock market – to re-distribute the funds of the nation to enterprising individuals and companies. But now, through private equity funds, the wealth of the nation is finding its way to entrepreneurs through a different avenue. Private equity is clearly now the preferred funding route for the eating-out market. As one La Tasca non-executive recently told me: “Private equity is where it’s at.”