ECI makes 5x money on Café Rouge

Legal & General Ventures has acquired UK restaurant chain operator Tragus Holdings from fellow mid-market firm ECI Partners for approximately £90m.

Mid-market UK private equity firm ECI Partners has sold Tragus Holdings, an independent UK restaurant chain operator to London-headquartered Legal & General Ventures (LGV) in a transaction valued at approximately £90 million (€128 million; $167 million), according to a source close to the firm.

Tragus owns and operates four divisions, comprising 157 restaurants: Café Rouge; Bella Italia, Mamma Amalfi and five brasseries. The business is expected to generate revenues of approximately £114 million in the year to May 2005.

ECI backed a £25 million MBI of the business in May 2002 from Whitbread Plc and has realised a return of 5.3x its original investment and an IRR of 94 percent, according to a press release. During ECI’s tenure, the company’s EBITDA grew from £4.2 million in 2002 to £13 million in 2004.

Commenting on the transaction, London-based Richard Chapman of ECI said in a statement: “This, our eighth exit in the last two years, is a tremendous exit for ECI and our investors. These realisations have returned ECI an overall 4x multiple on its original investments and provides an excellent platform from which to launch the raising of our new fund.”

ECI is currently investing its £175 million Fund VII, which closed in 2000 and is 70 percent invested according to Chapman. Fundraising for the new fund, which is likely to be slightly larger, 'though not a quantum leap' said Chapman, will begin in the near future.

LGV won a competitive auction process organised by Hawkpoint. Speaking to PEO, LGV managing director Brian Phillips said: “We were impressed by the quality of the brands and the track record of the guys since the business left Whitbread’s ownership. We intend to carry on expanding the business and opening a significant number of new restaurants with the core brands [Bella Italia and Café Rouge].”

The investment was the first one financed by LGV’s fourth fund. LGV raises fresh capital on an annual basis. The 2004 Fund IV, with £180 million of LP commitments, is the group’s most recent vehicle.