The Restaurant Group's leisure division sale removes 'poison pill' from the business

12 September 2023 by
The Restaurant Group's leisure division sale removes 'poison pill' from the business

The Restaurant Group's (TRG) decision to offload its struggling leisure arm has been hailed as a "significant milestone" for the business and received a positive response from analysts and the market.

TRG yesterday announced that it will pay rival Big Table Group £7.5m to take the division, primarily comprising the Frankie & Benny's and Chiquito brands, off its hands. This equates to £100,000 for each of the 75 restaurant sites.

In return, Big Table Group will pay a token £1 for the division.

The sale has largely been hailed as a positive move for TRG and one which will allow it to focus on its more successful Wagamama restaurants and Brunning & Price pub division.

Analysts at Numis said the sale was a "sensible move" that would remove a "poison pill" from its balance sheet.

Shore Capital hailed the transaction as a "significant milestone" for TRG. "[It will remove] the drag (and distraction) from the leisure estate and allow it to focus on the quality growth channels of Wagamama and Brunning & Price," it added.

Peel Hunt said the leisure sites could perform better under Big Table Group's stable of brands, which includes Las Iguanas, Banana Tree and Bella Italia.

"The disposal of the division is also positive in our view as its performance was going backwards under the Frankie & Benny's and Chiquito brands," Peel Hunt added. "These sites may do better under the Big Table's brand portfolio."

Goodbody pointed to the recent underperformance of the leisure division, which has been seen as holding back progress at TRG. Like-for-like sales declined 2% in Q2 and Q3 to date, while year-to-date like-for-like sales were down 3%.

"While the financial benefit of today's announcement is limited, strategically it will enable management [at TRG] to focus its time on its remaining estate, which has shown a more robust performance," said Goodbody.

TRG shares opened at 51.5p this morning after closing at 49.2p yesterday (11 September).

Around 3,000 staff who run the leisure division restaurants will move across to Big Table Group as part of the deal, which is expected to complete by early Q4 2023.

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