Wagamama sold to Frankie & Benny's owner

The Restaurant Group, the owners of the Frankie & Benny and Garfunkel's restaurant chains, has struck a deal to buy Asian-themed chain Wagamama.

The deal values the business, which opened its first restaurant in central London in 1992, at £559m.

The Restaurant Group said Wagamama had "consistently and significantly outperformed its core UK market."

It plans to expand the chain, which it says is well placed to capitalise on the trend for healthy eating.

The Restaurant Group (TRG) owns a number of well-known fast-casual dining chains, including Chiquito and Joe's Kitchen.

Outlets in this sector have struggled recently, along with others on the High Street, with a number of well-known chains either falling into administration or striking deals with creditors.

Burger chain Byron, Jamie's Italian and Prezzo have been among those closing branches and shedding staff.

Reasons for the downturn include higher raw material costs, partly due to the weaker pound since the Brexit vote, waning consumer spending power and higher business rates.

However, TRG says Wagamama, which is currently owned by the Duke Street and Hutton Collins private equity firms, has a "strong competitive advantage" as it is three times the size of its nearest rival, and is therefore the only substantial UK pan-Asian brand concept with scale.

Wagamama's now has 196 directly-operated and franchised restaurants, with about two-thirds in the UK, and its most-recent figures show same-store sales growth rose by 9.6%.

The chain is chaired by Allan Leighton, who has been chief executive of supermarket chain Asda and chairman of Royal Mail, among many other senior high-profile roles. He will now also join the board of TRG.

What is Wagamama?

• First one opened in Bloomsbury, Central London, 1992

• Inspired by Japanese noodle bars

• Pioneered communal bench seated tables

• Has 133 outlets in UK

• Total of 196 outlets includes restaurants in the US, New Zealand, Middle East, Romania and Croatia

• Inspired a short story - After Wagamama but Mostly Before, by Toby Litt

"Wagamama is a fantastic brand, with a market-leading pan-Asian proposition, which has consistently outperformed the casual dining market in recent years," said TRG chief executive Andy McCue.

TRG will fund the takeover through a combination of cash, debt and issuing more shares. News of the plan had pushed its shares down 14% by mid-morning.

Greg Johnson, analyst at Shore Capital, said the deal made sense, as TRG's Frankie & Benny's chain had not been thriving: "The acquisition increases its [TRG's] exposure to fast-growing channels, i.e. away from Frankie & Benny's, to 70% from just over half at present, and we would expect this trend to continue.

"The deal significantly transforms the [TRG] investment case, which should lead to faster growth and reduce its exposure to the structurally challenged parts of the group."