All eyes on US inflation figures while The Restaurant Group takeover may not be a done deal

“Inflation is on everyone’s minds today ahead of the latest figures from the US. Core CPI inflation is forecast to ease year-on-year from 4.3% to 4.1% and stay flat month-on-month at 0.3%. Any growth in the month-on-month figure would not go down well, particularly as the producer price inflation figures were hotter than expected yesterday. The market is hanging on the Fed’s every word to see if it believes rate hikes are no longer necessary,” says Russ Mould, Investment Director at AJ Bell.

“10-year US Treasury yields have eased this week from 4.8% to 4.57%, partly as investors seek the safety of government bonds amid a backdrop of war in the Middle East.

“On the stock market, all the main European indices pushed ahead including a 0.4% gain in the FTSE 100 to 7,647. Investors piled into commodity producers, industrials and healthcare. BP topped the leader board with a near-2% gain.

“Mobico – the business previously known as National Express – dived 29% after saying its turnaround efforts were taking longer than expected to achieve, leading it to suspend dividend payments and put its North American school bus operations up for sale to raise money to help pay down debt.”

The Restaurant Group

“The Restaurant Group’s turnaround efforts have led to a surprise takeover offer. No sooner had the company struck a deal to sell its Frankie & Benny’s and Chiquito chains, along comes private equity offering a wad of cash to take the remainder of the business private.

“Having a new owner with deep pockets might give management better options to turbocharge growth. The offer made the share price jump to its highest level since April 2022.

“Some shareholders might think this is fantastic news, others might consider the business to be worth a lot more than the 65p per share offered by Apollo when factoring its potential over the coming years. Indeed, it was only 2021 that the share price was trading at twice this level.

“The fact the share price at 66.4p is trading slightly higher than the takeover offer suggests the market believes we could either see a competing bid or shareholder opposition to the price in an attempt to make Apollo raise its offer. Such moves have been commonplace over the past few years, with private equity players throwing their hat into the ring to gauge appetite and then upping their offer to a more reasonable level.

“Interestingly, activist investors Oasis and Irenic Capital, who own 17.8% and 1.9% stakes respectively, have voted in favour of the offer. Therefore, any opposition over the takeover price will have to be led by asset managers Columbia Threadneedle, Royal London and Cyrus Capital, being three of the other biggest shareholders on the register.

“The Restaurant Group has three engines to drive growth. Wagamama still has the potential for more sites across the UK and for the format to be replicated in other countries. The Brunning & Price posh pub restaurants business looks like a cash cow and a nice little earner for the group. The third leg is the airport concessions operation which can do very well when travel activity is high as the outlets can charge more for items as they’ve got a captive audience with limited alternative options.”

These articles are for information purposes only and are not a personal recommendation or advice.