No Pain, No Gain: La Tasca's a tasty morsel for the private equity mob

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The Independent Online

Another No Pain, No Gain constituent is likely to be served up as a takeover dish. La Tasca, the restaurant chain, has admitted it is involved in bid talks, and as it is thought to have initiated the negotiations itself the chances of an agreed deal must be quite high.

The shares are around 170p against the 137.5p the portfolio paid a year ago. It is thought that any offer should be near the 200p mark, which would represent a welcome but not outstanding gain. Still, as the nation's most powerful retailer keeps reminding us, "every little helps".

I am not surprised that La Tasca, which mainly runs Spanish-style restaurants, has attracted predatory attention. Indeed, the eating-out industry, ranging from pubs to high-priced upmarket establishments, seems to be booming. And what is regarded as the casual dining contingent is doing particularly well. La Tasca falls into the casual category; so does another constituent, Prezzo.

Stock-market talk suggests that La Tasca could become yet another victim of the ubiquitous private equity marauders. They have already shown an appetite for eating out. Blackstone, rumoured to be on the La Tasca menu, last year acquired Tragus, the Café Rouge business that has been on an ownership merry-go-round in recent years.

But Blackstone is not the only potential buyer. Kaupthing, an Icelandic bank, is another name in the frame. The Icelanders, largely through Baugur, have acquired hundreds of well-known high-street outlets and a move into restaurants could be regarded as a logical extension of their retail activities.

Other recent private equity catering deals include the rather astonishing Cinven acquisition of Gondola (Pizza Express, Ask and Zizzi) following its return to the stock market after it had already received a private equity going-over.

And a former constituent, Paramount, has gone under the entrepreneurial wing of the Prudential insurance giant. When I recruited Paramount, it was a small pubs chain. It fell victim to Stock Exchange red tape and eventually sold its hostelries before moving into the restaurant business through Chez Gérard. The portfolio departed, at a reasonable profit, shortly after the pub disposal.

La Tasca only arrived on the Alternative Investment Market (AIM) two years ago. The shares were floated at 110p. Since then, it has performed relatively well. But it disconcerted some followers when it disclosed that the counter-attraction of last summer's football World Cup in Germany cut into trading and interim profits emerged at a disappointing £1.7m (£1.6m). Still, the group, with more than 70 restaurants, appears to have got over its football fatigue and year's results are expected to record encouraging progress.

Shares in Prezzo, an Italian restaurant chain, have also been hitting new peaks without, as far as I am aware, much bid interest. At 75p, they are one of the portfolio's star performers. The Kaye family, with some 50 per cent of the capital, have proved willing sellers in the past, profitably unloading such brands as Garfunkel's and Zizzi. I would not be at all surprised if the Kayes sold Prezzo - presumably to one of those eager private equity groups - and then concentrated their culinary skills on their second-string venture, the quoted Tasty, a small Oriental restaurant business.

If La Tasca, where directors control about 25 per cent of the capital, should fall victim to a bid, I will attempt to recruit another restaurant business. With more and more people eating out - it is claimed that spending topped £22bn last year - the major players, ranging from the Restaurant Group (owner of Garfunkel's) to pub chains such as Mitchells & Butlers, should prosper and the takeover cash, largely from the privateers, continue to swirl around. A consumer slowdown could, as the World Cup illustrated, erode takings but, despite higher interest charges, there seems to be little sign of any significant belt-tightening.

Unfortunately, there are not many quoted groups still around. High share ratings dominate the industry. The Kayes' Oriental excursion already has an exotic price. It has yet to show its paces, although the family's involvement should be good enough for investors. M&B, a proven success, is also on a giddy rating with takeover speculation never far away.

There are, however, a few other groups that I should examine before any decision is reached.

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