The Restaurant Group sale: Analysts suggest offer could 'flush out' another bid

A £700m takeover bid for Wagamama owner the Restaurant Group has pushed up its share price and divided analysts over whether it undervalues the business.

TRG's share price jumped 36% yesterday after announcing its had agreed to be acquired by a US private equity firm.

Apollo Global Management is to purchase the casual dining business, which operates more than 400 UK sites, for 65p a share.

This represents a 34% premium on TRG's closing share price of 49p on 11 October.

Analyst Stifel said it understood Apollo had made an unsolicited approach to TRG and it was possible the move "flushes out another bid".

"TRG has arguably been ‘in play' for some time, given the activist interest and ongoing strategic review," it said in a note.

"On balance therefore we expect this deal to go through and would recommend investors accept the 65p offer."

At least 75% of shareholders will need to back the deal, which would see TRG shares taken off the London Stock Exchange and into private hands.

Stifel said it understood TRG's top six shareholders had recommended the offer.

Analysts at Goodbody said the deal at 65p a share was a "healthy premium" for a business that had struggled historically.

"While the business was clearly making good progress on its turnaround plan, we think this is an attractive offer for the Restaurant Group," it wrote.

However, Apollo's offer was deemed too low by some other analysts. Shore Capital said an offer of 80p per share should have been a "starting point" due to the long-term potential of the business.

Liberum analysts pointed out that while the £506m bid implied a £701m enterprise value for the business, TRG paid £559m for Wagamama alone back in 2017.

The deal comes after months of investor infighting at TRG over its dragging share price, executive pay and the direction of the business.

Last month, TRG announced it would pay rival casual dining business Big Table Group £7.5m to take its struggling leisure am, including the Chiquito's and Frankie & Benny's brands, off its hands.

If approved by shareholders, the deal is expected to complete in early 2024.