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Venture capital group backed for PizzaExpress bid

March 18, 2003

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LONDON -- TDR Capital and Capricorn Ventures has confirmed it now has backing for a bid to take over PizzaExpress, and that it has begun talks with the pizza group's independent directors about topping a current offer from Venice Bidder, a consortium led by former PizzaExpress directors Luke Johnson and Ian Eldridge.

According to the Financial Times, TDR and Capricorn will top Venice's 367 pence (U.S. $5.73) per-share offer (£285 million [U.S. $445.2 million]) by paying between 380 pence and 390 pence (U.S. $5.94 to U.S. $6.09).

The Venice Bidder offer was originally accepted by PizzaExpress' three non-executive directors because it was the highest received at the time. However, Nigel Colne, the chairman of PizzaExpress and the leader of the group of non-executives, said a higher bid would be considered.

Should another offer be accepted, however, PizzaExpress will have to pay Venice a break fee of £2.8 million (U.S. $4.3 million), something that hasn't settled well with shareholders. (See "PizzaExpress investors demanding Colne's resignation.")

"Clearly it would be in shareholders' interests for there to be a higher offer and if that is what materializes we would consider it," Colne said. "I think it would have to be at a significant premium -- it's not a matter of pennies."

The third party in the discussions is the company's executive board, which is considering a management buyout. But Numis Securities market analyst Andrew Saunders doubted that could happen, however.

"It's difficult to see how they will be able to pay back the finance," Saunders said. "I would look at a seven-year turnaround, and at 370 pence (U.S. $5.78) a share, the cash-flow it is generating does not come close to that. If I were a shareholder I would be rubbing my hands."