Takeover on the menu after £559m PizzaExpress approach

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The Independent Online

The group behind the PizzaExpress, Ask and Zizzi restaurant chains has had a surprise £559m takeover approach from a UK private equity firm, less than a year after it returned to the stock market, sending the shares soaring 11 per cent yesterday.

Shares in Gondola Holdings, which have traded close to their 320p flotation price over the summer, shot up 40p to 402p after the company said it had received an informal offer of 415p a share in cash. The news also buoyed other restaurant operators.

Gondola did not name its suitor but it is believed the approach came from the private equity firm Cinven. Other buyout firms that have been active in the leisure sector include Electra, Duke Street, CVC, Phoenix and HgCapital. Other possible candidates are Permira and 3i. Any buyer would have to take on Gondola's debts of £346m.

The approach has taken the company, one of Britain's largest restaurant groups, by surprise so soon after it floated on the stock market for the second time last November. PizzaExpress was taken private in 2003 by the venture capital groups TDR Capital and Capricorn Ventures which merged it with Ask Central, the owner of Ask and Zizzi, to create Gondola.

PizzaExpress was first floated on the main stock market in 1993 by Luke Johnson, the Channel 4 chairman, with Hugh Osmond and David Page. Ask, which was set up by the brothers Adam and Sam Kaye, listed on the Alternative Investment Market in 1995. It seems likely that a private-equity bidder would recruit a proven restaurant entrepreneur to head the business.

Gondola is 48 per cent-owned by TDR and Capricorn, with TDR owning 32 per cent and Capricorn, which also holds a large stake in the Nando's restaurant chain, holding 16 per cent. The third largest shareholder is Fidelity at 9 per cent. Speculation that the two venture capital backers would want to take Gondola private again proved unfounded as the company would have to disclose this.

Gondola's management stand to pocket millions of pounds in cash if a takeover goes ahead - the chairman David Ross is in line for £3.9m and the chief executive Harvey Smyth £6.8m.

Gondola is the leader in the fast-growing pizza and pasta eating-out market with 518 outlets, of which 319 are branded as PizzaExpress, 110 Ask and 81 Zizzi.The group has made no secret of its desire to roll out a fourth national brand, either organically or through acquisition. It is trialling three new brands which are being tested at eight sites - a pizza delivery concept called Lupa, an American diner called Jo Shmo's and a pizza-by-the-yard concept under the name of Al Rollo and Yard.

Joseph Thomas at Investec thought Gondola's shareholders would find the takeover approach attractive "given the leasehold structure of the business and its exposure to the competitive pizza and pasta market."

Gondola's joint brokers, Merrill Lynch and Deutsche Bank, have set share price targets of 410p and 414p respectively. The group recently accelerated its growth strategy to 25 to 30 restaurants a year, from 20 to 25 previously, with the aim of opening 300 more outlets over the next decade. In the last year to 2 July, it opened 23 sites. The maiden half-year results revealed a pre-tax loss of £4.1m, largely due to flotation costs. Full-year figures are due to be published on 21 September.

The company, which revamps its menu twice a year with seasonal products, reckons the eating-out market is worth about £66bn, £7bn of which is pizza and pasta.

Rumours that Gondola has recently held talks to take over the Giraffe brand have been dismissed by insiders.

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