ABN Amro tops pizza bidding

ABN Amro Capital has beaten rival bidder PAI Management with a £266m offer for UK-listed restaurant chain PizzaExpress.

ABN Amro Capital has joined forces with former PizzaExpress directors Luke Johnson and Ian Eldridge to launch a recommended cash offer for UK-listed restaurant group PizzaExpress.


The team has formed Venice Bidder, which is offering 367 pence per share, valuing PizzaExpress at £263m. The offer pips a 350 pence per share offer from PAI Management and PizzaExpress director David Page, long thought to be in the driving seat for the business.


The offer represents a premium of approximately 40 per cent over an adjusted closing PizzaExpress share price of 263 pence on 13 December 2002 (adjusted to exclude the interim dividend), the last dealing day prior to the commencement of the offer period. PizzaExpress shareholders will receive a total of 370 pence in cash to include the interim dividend.   


Debt financing for the offer is being provided by Royal Bank of Scotland and HSBC.


“We have teamed up with Luke Johnson and Ian Eldridge who we regard as an experienced management team with in-depth knowledge of the industry,” said ABN AMRO Capital chief executive Ian Taylor. Between them, Johnson and Eldridge have over 25 years experience working for PizzaExpress. “We consider PizzaExpress to be one of the leading brands in the UK restaurant sector.”


Pizza Express enjoyed sustained growth over three decades, increasing its number of restaurants to over 300, including restaurants in Japan, Russia, India and France. However, the company, which listed on the London stock exchange in 1993, reported its first fall in profits in June 2002, citing tough trading conditions in London and within the M25 generally, the core market for PizzaExpress.


In its most recent results published in September, the company reported a 15 per cent increase in turnover to £213.7m, but like-for-like sales in its core PizzaExpress business fell by 1.5 per cent. Pre-tax profits were down 0.5 per cent from £39.9m to £39.7m. “Whilst trading has suffered in tough market conditions, we believe that the opportunity exists to restore performance over the medium term away from the glare of the public markets,” added Taylor.


PAI Management had long been thought to be the frontrunners for the business, although there were reports, denied by the firm, that it was struggling to raise debt for the deal. The ABN Amro Capital-Luke Johnson alliance was reported to have broken down earlier this month because of disagreements between the two. The first offer for Pizza Express emerged in November, when Hugh Osmond, currently preparing a bid for hotel and pub group Six Continents, made an indicative offer of 330-350 pence for the business.


Over the last two and a half years, the ABN AMRO LBO Fund has invested in Accantia Limited, Perkins Foods, a European supplier of chilled and frozen pre-prepared foods, Commodore Shipping, the operator of the passenger and freight ferry business from the UK to the Channel Islands and Jessops, a leading UK photo-imaging retailer.


Capricorn Ventures and TDR Capital, a private equity fund management firm established by Manjit Dale, Stephen Robertson and Tudor Investment Corporation, announced this morning that they were considering making a higher offer for the business. The two firms, advised by ING Barings, have been in extensive discussions with PizzaExpress, and are preparing an offer 'at a premium' to the offer announced by Venice.


The ABN Amro consortium was advised by Hawkpoint. The sale was coordinated for PizzaExpress by Credit Suisse First Boston.