Clapham House Group, the company that owns the Gourmet Burger Kitchen and Real Greek restaurant chains, is set to be bought by its high-street rival Nando's for £30.4m.
The UK arm of the South African group Nando's said yesterday that it was making a 74p-a-share offer for Clapham House, an 8 per cent premium on Thursday's closing share price.
Nando's is owned by private equity group Capricorn Ventures International, which already holds a 27 per cent stake in Clapham House. In July, the group confirmed in a statement to the Stock Exchange that it was in takeover talks after its shares jumped from 56.5p on 23 July to 75.5p a week later.
Aside from the growth in July, Clapham House's shares have struggled over the last 12 months, falling by more than 7 per cent. It is understood that Nando's was the only bidder for the group.
"As macroeconomic weakness has persisted in the UK, the trading environment for restaurant businesses in the UK has been difficult. This is evidenced by Clapham House's volatile weekly trading performance," Nando's said.
"Against an increasingly competitive market, [Nando's] believes significant investment and time are needed to reinvigorate Clapham House's businesses." Nando's plans to fund the deal through cash reserves.
Clapham House's recent financial results have been upbeat, however. Unveiling its preliminary results two months ago, the group said pre-tax profits had increased by 50 per cent, to £1.5m. Despite the improved numbers, the wider restaurant and fast-food sectors have suffered as the economy has only gradually recovered from last year's recession.
A range of economic indicators, published earlier this week, indicated that trading could also be tough in the coming months, as the Coalition Government introduces a range of spending cuts designed to plug the budget deficit.
On Thursday, the Office for National Statistics said that retail sales had fallen by 5 per cent in August, confounding the City which had been expecting increased activity on the high street.
The Nationwide Consumer Confidence Index for August, published on Tuesday, showed that despite next month's government spending review, the mood among consumers is improving. The index rose by 5 points to 61 last month, a similar level to a year ago, but still well below historic averages.
In a statement, Clapham House's directors said they considered the terms of the Nando's offer to be "fair and reasonable" and recommended it to other shareholders. However, some analysts suggested that Capricorn's existing stake helped to restrict the premium.
Nick Batram, of KBC Peel Hunt, suggested that the deal was disappointing for Clapham House shareholders. "The business has lost its way and Capricorn's 27 per cent stake was always going to be a depressing factor in terms of price," he said. Management's 10.7 per cent stake will automatically support the bid.
Others disagreed, pointing out that with little demand for assets in the restaurant sector, the deal was reasonable. "Considering our cautious view on the sector and, in particular, on the relatively speaking lower- margin operators, we think the offer represents reasonable value," said Hugh-Guy Lorriman, an analyst at Seymour Pierce.
Sources close to Clapham House said that an announcement on the deal had been delayed because of management pressing for a higher price. Letters will be sent to shareholders next week, with both groups hoping to finalise the deal by the end of October.