The Restaurant Group's takeover of Wagamama scrapes through despite City uproar

Casual dining firm The Restaurant Group on Wednesday scraped through a controversial £559 million takeover of Wagamama, despite a major shareholder rebellion.

The company behind the Frankie & Benny’s and Chiquito brands said it had secured enough support to buy noodle bars chain Wagamama.

However, shareholders voting in advance only supported the deal by a margin of 60.5% to 39.5%. Investors voting in person were not expected to alter the margin drastically.

Investor approval comes despite a number of shareholders coming out to oppose the deal for the Asian-themed business, founded by restaurateur Alan Yau in 1992, since it was unveiled last month.

There have been concerns about The Restaurant Group taking on £202 million of net debt in Wagamama. The deal will be funded by a deeply discounted £315 million rights issue and will result in a dividend cut.

City analysts pointed out that the result of the meeting at 200 Aldersgate near St Paul’s Cathedral today was no landslide victory.

The Restaurant Group’s chief executive Andy McCue will now be under immense pressure to prove a purchase that will add more than 190 extra sites to its estate is viable during a casual dining crunch in the UK.

Like rivals it is grappling with higher rents, business rates and weaker consumer confidence. Chains such as Prezzo and Jamie’s Italian have closed a number of stores.

McCue has insisted the swoop from private equity firms Duke Street and Hutton Collins will help the business grow internationally. He has also pointed out that Wagamama has outperformed the casual dining market here.

The shares fell 9.1%, or 21.5p, to 213.4p.

Debbie Hewitt MBE, chairman of The Restaurant Group, today said: "We are confident that the deal will create significant long-term value."

She added: "The acquisition of Wagamama creates a raft of new opportunities for us to capitalise on in the months and years ahead."

Shareholders have been split. Top five investor JO Hambro is supportive, with fund manager Alex Savvides saying he was “gobsmacked” by the level of animosity surrounding the deal. Schroders, a top 10 holder, and Royal London also lined up to back the takeover.

Opposition was led by Columbia Threadneedle, which owns nearly 8%, after it said the price threw up too many “red flags”.

Grizzly Rock and Vivaldi Asset Management, which own about 2%, also urged The Restaurant Group to shelve the takeover.

Douglas Jack, analyst at Peel Hunt, said today’s voting “reflects the high risks and equity dilution associated with this transaction”.