Gaucho Group Ltd (United Kingdom) - Dec 2007

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01 December 2007

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Buyout deal

Intermediate Capital Group (ICG) has invested in the tertiary management buyout of Argentinean restaurant chain Gaucho Group Ltd in a deal reported to weigh in at approximately £120m. ICG provided minority equity and mezzanine to fund the transaction, which sees the management team acquiring a majority stake in the business and Phoenix Equity Partners exiting. Debt facilities were provided by Lloyds TSB and Royal Bank of Scotland.

Exit deal

The deal was understood to have generated good returns for Phoenix. Phoenix was originally considering a flotation of the business seeking a valuation of approximately £100m or £115m including debt, but a combination of volatile markets and approaches for the business from a number of interested parties made a tertiary buyout the preferred exit route. Hawkpoint advised Phoenix on the divestment, which did not involve a formal auction process. ICG came up with a strong valuation and the business was subsequently sold.

Phoenix acquired a 45% stake in Gaucho in a £55m secondary buyout deal from Barclays Private Equity (BPE) in August 2006 (28 August 2006, page 31). The deal was supported by debt provided by Anglo Irish Bank Corporation Plc. BPE had owned Gaucho since January 2005 when it backed the company’s £23.5m buyout with debt provided by Royal Bank of Scotland (7 February 2005, page 22). During Phoenix’s ownership of Gaucho, profits grew by 50% as the business showed continued organic growth and the results from investment in three new restaurants and developed a strong pipeline of restaurants.

Company

London-headquartered Gaucho was founded in 1976 in Amsterdam. Today, the company has 11 restaurants, nine of which are in London with one in Amsterdam and one in Manchester. The restaurant chain serves Argentinean-style food.

People

Francois de Mitry led the deal for ICG. David Burns and Andrew Deakin led the exit deal for Phoenix. ICG has appointed Andy Bassadone, formerly of Strada and Signature Restaurants, to join the board as a non-executive director. Zeev Godik is the founder and CEO of the company and Stephen Gee is its chairman. Neale Broadhead and Andrew Tully arranged the debt on behalf of Lloyds TSB.

Advisers

Purchaser - Latham & Watkins, James Chesterman, Richard George (Legal)Purchaser - PricewaterhouseCoopers, David Trunkfield, Philip Hines (Financial Due Diligence)Vendor - Hawkpoint, Ed Arkus, Patrick Wilson (Corporate Finance)Vendor - Travers Smith, Philip Sanderson (Legal)

Sourced from: UK & Ireland unquote" 360 (Jan 2008)