Duke Street gobbles up wagamama

Lion Capital, which has reportedly raised more than half of the €2bn target for Fund III, is selling wagamama for £215m. Duke Street will be the Japanese chain's third private equity owners.

Duke Street will purchase Japanese noodle bar chain wagamama from Lion Capital in a deal understood to be worth about £215 million (€244 million; $346 million). Duke Street is investing from its sixth fund, which closed in 2007 on €963 million.

Consumer-focused Lion had been seeking to exit the restaurant chain pre-financial crisis. In 2007, it called off a planned public float of the company that was expected to raise  £225 million because, a source said at the time, it expected a better price from a trade sale.

Lion, formerly the European affiliate of Hicks Muse Tate & Furst, purchased wagamama in 2005 for  £102.5 million from Graphite Capital, a London-based mid-market firm which made a 10.2x return on its investment in the restaurant chain.  

Since wagamama’s establishment in 1992, the chain has grown to 70 restaurants in the UK, three in the US and a franchise of 36 restaurants across Europe, the Middle East, Australia and Asia.

“wagawmama has the potential…to extend its category leadership in the UK and accelerate its plans for international expansion,” said Duke Street partner John Harper in a statement.

Hutton Collins, a previous investor in wagamama, is contributing a combination of mezzanine and equity financing to the deal. GE Capital, Investec and Lloyds are providing senior secured debt to fund the acquisition, as well as working capital to support new restaurants for the company.

Duke Street has been an active investor in 2011, acquiring financial services company UK Wealth Management and agreeing to purchase French online cruise travel agent QCNS, a transaction that is in the process of closing.

To date, the firm has returned €1.2 billion to investors in its fifth fund through the sale of 11 companies. Duke Street currently has €1.8 billion in total funds under management.

Lion, meanwhile, is fundraising for its third buyout fund, which is reportedly more than halfway towards its  €2 billion target.