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The UK food and beverage sector has seen a frenetic pace of merger and acquisition activity in the past months, with private equity in particular showing a strong appetite for the restaurant sector. The Casual Dining Group (CDG), formerly known as Tragus Group, has been a key mover within this trend. Its purchase of the Spanish tapas chain La Tasca for £25m in September followed the acquisition of Las Iguanas, the 41-strong nationwide Latin-American restaurant-bar earlier this year.
The acquisitions are supporting an organic growth plan for CDG whose brands include Café Rouge, Belgo and Bella Italia. Fifty-three major refurbishments are planned within the next six months, and an additional 30 new restaurants due to open in the next 12 months. Indeed, the value of the La Tasca purchase was in its locations and CDG plans to convert up to 25 of its 40 sites into another concept, perhaps its Bella Mia Italian format. A pipeline of new openings across leisure parks and prime high street locations is also in place and supported by investment in upgrading its existing brands. Bella Italia’s brand update has sparked a big trading improvement, and a new look and improved menu at Café Rouge is underway.
This flurry of activity follows a well-reported downturn for the group involving a massive restructure for the Tragus group and the painful but voluntary sale of the Strada chain of Italian restaurants. Out of the ashes comes the phoenix and having re-established themselves as The Casual Dining Group – and reducing its debt from£258 million to £91 - million a convincing private equity-led turnaround is underway.
This is more than a question of new leadership under Steve Richards, who took the reins at CDG 14 months ago. Our view is CDG recognised the growth potential of the casual dining market – pun intended - where diners want great value, quality and fun food at accessible prices. Brands are being acquired and evolved to support this proposition. With YO! Sushi, Ed’s Easy Diner, La Tasca, Gaucho, Côte, Giggling Squid and Bill’s all reportedly up for grabs or weighing up options, the market is wide open for CDG, itself expected to consider a possible sale or IPO within the next two to three years.
The casual dining market is quickly becoming the one to watch.
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