Eating place rich person Osmond eyes Gaucho bid

Image: Gaucho has not been immune to the slowdown that has affected restaurant chains and the wider high street

By Mark Kleinman, City editor

The leisure industry tycoon who took Pizza Express public 25 years ago is among a trio of suitors circling the struggling steak chain Gaucho.

Sky News has learnt that Hugh Osmond, whose other investments in the casual dining sector include Strada, has tabled a proposal that would involve his investment vehicle taking control of Gaucho.

Osmond Capital is competing with Core Capital, which is owned by ESO Capital and understood to be backing Gaucho's existing management team, and Limerston Capital, an investor in companies including Spark Energy.

Insiders said that the three bidders were expected to offer less than the £50m owed by Gaucho to its lenders and that advisers at KPMG were trying to conclude a deal this month.

Mr Osmond is one of the UK's best-known investors, having made fortunes from Pizza Express and Punch Taverns, among other businesses.

Image: Hugh Osmond founded Punch Taverns and Sun Capital Partners

Gaucho has been hit by the high street turmoil which has prompted restructurings at rivals including Carluccio's, Prezzo and Byron.

Its current owner, the private equity firm Equistone, and its banks kicked off talks with potential buyers in May in an effort to place itself on a sustainable financial footing amid torrid trading conditions in the casual dining sector.

However, any deal is likely to be undertaken through a pre-pack administration because of the cross-guarantee structure which means that the parent company is liable for the financial problems of its loss-making Cau chain.

Gaucho drafted in advisers earlier this year to examine whether to close or sell Cau's 22 restaurants, putting roughly 750 of its 1,500 staff at risk of losing their jobs.

The group is Britain's biggest premium steak restaurant chain by number of outlets.

Insiders have cautioned that there was no certainty that a sale would result, adding that an insolvency mechanism called a Company Voluntary Arrangement (CVA) remained an option to exit the Cau estate.

A failure to agree a restructuring with creditors could lead to the company filing for administration.

In a statement issued to Sky News, a Gaucho spokesman said: "We will not comment on individual proposals but we can confirm that all proposals are being evaluated on the same criteria of value, deliverability and certainty of funding.

"We are working through the proposals to secure the best outcome for all stakeholders."

The talks with potential new owners come after Cau has seen double-digit declines in like-for-like revenues, with over-expansion, poor site selection and onerous lease arrangements among the factors now contributing to Gaucho's financial difficulties.

The Gaucho-branded estate, which comprises 16 restaurants, is said to be performing "in line" with the broader restaurants sector, and is not under threat of closure.

However, it too has seen a slump in profits, according to insiders.

Gaucho recently appointed a new management team in an attempt to stabilise its financial performance, although it has limited experience of the restaurant sector.

The company's founder, Zeev Godik, stepped down several months ago.

He was replaced by Oliver Meakin, who joined from Maplin, the electricals retailer which itself plunged into administration earlier this year.

By pursuing a restructuring that involves shutting restaurants, Gaucho will join rival casual dining chains such as Byron, Carluccio's, Cote and Prezzo, all of which have confirmed similar plans in recent months.

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A combination of rising costs and more cautious consumer sentiment has hit casual dining businesses, while retailers including Carpetright, New Look and Poundworld‎ have either slipped into administration or closed scores of shops‎.

None of the bidders for Gaucho contacted by Sky News would comment on Friday.

Original Article

Business

January 25, 2019