Consumer Sector Comment – January 2015


As many enter into January fitness regimes to work off the festive over-indulgence, it’s perhaps a good time to reflect on some of the positive trends in the fast-food and casual dining sector. One of the most talked about transactions in recent months has been the planned IPO by US gourmet fast-food operator Shake Shack. The chain was established by restaurateur Danny Meyer and has grown from a single hot dog cart in New York’s Central Park to 63 locations worldwide, with around half owned by the company and the remainder by licensees. Total revenue in 2013 was €73m, up 41% on the previous year, with a successful growth formula based on a simple menu offering high-quality traditional fast-food options – burgers, hot dogs, etc. Shake Shack is not alone – before Christmas, Habit Burger Grill (another premium US burger chain) raised over €75m in an IPO valuing the company at around €400m. Post-float share price performance has been strong with shares currently up around 70% on the initial offer price.

It’s not just the newer chains which are seeing strong investor interest, with some of the more familiar and established casual dining formats also proving attractive to investors in the UK and elsewhere. There have been many transactions, a few highlights include:

  • Electra Partners announced shortly before Christmas that it had invested €130m alongside management to acquire the UK franchise of TGI Friday’s. The deal came after US-based TGI Friday’s was itself sold to Sentinel Capital Partners and Tri-Artisan Capital Partners earlier in 2014;
  • Cinven’s break up of Gondala Group has resulted in a number of transactions, the last of which saw Bridgepoint acquiring ASK Italian and Zizzi restaurants for €325m in December 2014;
  • Cinven also sold Pizza Express for around €1.2bn to Chinese private equity firm Hony Capital, and Byron Hamburgers to Hutton Collins Partners;
  • Hugh Osmond’s Sun Capital Partners has acquired Strada restaurants, planning to turn them into “all day hubs”;
  • HIG has established an Iberian food service platform with the acquisition of Café & Té and Panaria, two coffee shop, bakery and tapas bar operators in Spain;
  • CVC Capital Partners acquired a controlling stake in Da Niang Dumpling, a Chinese fast-food restaurant operator. This came after its investment the previous year in South Beauty Investment Company, a well-known high-end restaurant chain in China.

At Clearwater International, we have previously commented on the success of the casual dining market over recent years. Given expected increases in real income in 2015, together with longer-term trends supporting increasing frequency of eating out, we anticipate more appetite from investors and plenty of M&A activity. Many more deals are in the pipeline: in the UK alone, chains such as Giraffe (acquired by Tesco in 2013), Loungers (backed by Piper), Bills’ (backed by Richard Caring) and Ed’s Easy Diner are among those speculated in the press to come to market in 2015.


Selected UK Consumer Deals

Nobia AB, the Swedish kitchen group which owns the Poggenpohl, Hygena and Magnet brands, acquired Rixonway Kitchens Ltd, one of the UK’s leading manufacturers of rigid kitchens for the social housing, independent builders merchant and private development markets, in a deal worth €45m.

BGF has invested €10m into Canburg, a luxury and bespoke fitted furniture business which owns Smallbone of Devizes and Mark Wilkinson, to accelerate the company’s UK and international growth strategy.

Cambridge Weight Plan Ltd, a manufacturer of diet products, was acquired by its employees. The deal comes after former co-owners Eileen Skinner, Robert Thompson and John White exited the Corby-headquartered business, which was previously 49% employee-owned.

Ares Management, a US private equity firm, acquired Farrow & Ball Ltd, the premium paint and wallpaper manufacturer, for a consideration of €360m. Farrow & Ball was Ares’ second European transaction in 2014, following the earlier acquisition of house builder London Square.

Phoenix Equity Partners invested in Riviera Travel Ltd, the escorted tours and river cruise operator.

Inflexion Private Equity Partners has acquired a majority stake in Scott Dunn Ltd, the UK-based tour operator specialising in luxury holidays. The transaction will enable Scott Dunn to expand its portfolio of destinations and products. Post completion, Scott Dunn’s founder and president Mr Andrew Dunn will retain a significant stake in the company.

Bravofly Rumbo Group NV, a leading European online travel agency headquartered in Switzerland, has made a binding offer to acquire from Sabre Corporation. The transaction is valued at €155m.

Felda Investment Corporation Sdn Bhd, a Malaysian investment holding company, has acquired Grand Plaza Hotel, a UK-based hotel with services apartments, for a consideration of €80m.

PE firm CVC Capital Partners has agreed to acquire an 80% stake in Sky Betting and Gaming (Sky Bet), the online provider of betting and gaming services, from Sky plc. CVC has agreed to acquire Sky Bet for an enterprise value of €1bn.