Activist Oasis puts pressure on Wagamama owner for reforms
Shares in The Restaurant Group, which also owns Frankie & Benny’s, have declined by almost two-thirds over the past year.
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Wagamama owner The Restaurant Group has shown “little hope for the future” and is in need of a strategy overhaul, an activist shareholder has urged.
Oasis Management, a hedge fund which holds a 6.5% stake in the company, called on the hospitality firm to “re-align its priorities” and take immediate steps to restore market confidence.
Shares in The Restaurant Group, which also owns Frankie & Benny’s, have declined by almost two-thirds over the past year.
The group recovered to profitability in the latest half-year but is among restaurant and pub operators to have come under heavy pressure from rocketing energy and food inflation.
The hedge fund has said in an open letter that it privately approached the business with suggestions but has opted to go public after it was rebuffed.
“Oasis maintains that this decline – which began before the pandemic – is due to group level decision-making and failure of oversight by a board that has lost focus on long-term value creation and its alignment with the shareholder perspective,” the investor said.
“Oasis considers that the board’s approach has caused strategic stagnation and the deterioration of standards in market communication, resulting in a continuing and prolonged period of relative share price underperformance.
“This persistent loss of focus is particularly concerning considering the lack of demonstrated value delivered by the TRG board relative to promises made alongside the shareholder funding used to recapitalise the business.
“Still worse, Oasis considers company announcements and market consensus to indicate little hope for the future based on the current trajectory, propagating low market confidence and unattractiveness to new investor capital.”
The fund manager called on the company for “significantly improved” board oversight and strategic control, urging greater transparency with the market over its plans for growth.
James Wheatcroft, equity analyst at Jefferies, said: “We agree with the sentiment of activist shareholder Oasis that significant value resides within The Restaurant Group.
“The arrival of an activist should act as a catalyst to highlight that value.”
In response, The Restaurant Group questioned a number of points made by Oasis in its letter.
“Whilst Oasis states ‘they have been engaging with TRG for several years’, our chairman met Oasis face-to-face for the first time in December 2022,” the hospitality firm said.
TRG said it is already reviewing the group’s strategic options and concluded that it should not be disrupted by an additional process following Oasis’s request.
In a statement, TRG added: “The Covid global health pandemic and the current cost-of-living crisis have created huge challenges for the UK hospitality industry and this has been reflected in TRG’s share price.
“However, swift and decisive management actions taken during Covid were viewed as having successfully guided TRG through an extremely challenging period.
“The TRG board always welcomes constructive dialogue with our shareholders and will continue to engage with Oasis along with our entire shareholder base with the common goal of delivering shareholder value.”
Shares moved 1% higher to 34.92p following the Oasis statement.