Good Spirits Hospitality is on the lookout for more takeover opportunities following its $27.2 million purchase of privately-owned Nourish Group which owns some of the country's best-known restaurants.
Shares in Good Spirits Hospitality GSH leaped by close to 15 per cent to 79c following the announcement of the transaction which will double the size of the company's hospitality and restaurant business. The deal comes at a time the company hopes the Covid-hit sector will bounce back strongly from lockdowns and restrictions.
GSH is mainly a pub owner but with the deal gets Soul Bar in Auckland's Viaduct Basin, Talulah, The Chamberlain, The Brit, Andiamo, Shed 5, The Crab Shack (Wellington), Pravda Cafe and Grill, Jervois Steak House (Auckland and Queenstown) and also provides advisory services to Bistro Lago.
Missing from the lineup of Nourish restaurants is Euro, whose closure was announced last month. Nourish Group's founder Richard Sigley - who will be part of the merged operation - described Euro as having its own challenges before Covid-19 hit but expected there would be more rationalisation in the sector as a result of the pandemic.
However, the sale would give certainty to the Nourish stable and close to 500 staff. The food and service culture built up over two decades wouldn't disappear, instead the backing of a listed company would give the Nourish side of the business access to more capital.
''So you'll definitely see a growth in our brands.''
GSH chief executive Geoff Tuttle said his company had not picked up Nourish as a "distressed asset".
A "fair deal" was the best way of describing the proposed transaction which is still subject to some conditions.
Tuttle said it was good news for an industry that had been stuck in gloom for some time and faces predictions that many restaurants won't reopen or will struggle as a result of lockdown, especially in Auckland.
"This is a long-term investment and we see Covid as having a temporary impact on our industry. We just couldn't not jump at an opportunity like this when it became available."
He said there would be others around the country for the company to look at which, like the Nourish transaction, allow it to spread from its Auckland base.
GSH reported a $5.8m net loss in the last financial year, the same as the previous 12 months - and said Covid continued to have an impact on the business.
Sigley, a veteran of the restaurant scene, said he too expected the industry to bounce back strongly, especially if restrictions were lifted in Auckland as anticipated in the run-up to Christmas.
But he wants the city to move straight to Orange in the traffic light system rather than Red where hospitality is limited to 100 people with vaccine passports. Under Orange there are no limits for those vaxxed.
"With vaccination rates beings as high as they are and our staff eventually 100 per cent vaccinated it would seem ludicrous to me that you start at Red."
Restaurant Association chief executive Marisa Bidois said the sooner businesses can reopen with the least restrictions the better.
There was a lot of pressure on hospitality businesses right now. "People are paying off accumulated debts which may mean we see more business sales and takeovers."
Auckland's Heart of the City estimated that by last month restaurants and bars had lost $320m since the beginning of last year and trade was down by 95 per cent under level 3.
Buddle Findlay is advising GSH on all aspects of the transaction and the debt and equity financing.
The deal is conditional on obtaining shareholder approval, GSH's financier (Nomura subsidiary Pacific Dawn Limited) entering into new financing agreements, obtaining debt and equity to fund the transaction and securing supplier and landlord consents.
The shareholder vote to approve the transaction will be sought in a special meeting in the first quarter of 2022.
GSH chairman Duncan Makeig said the deal would be transformational.
"We are excited about the opportunity to leverage Nourish Group's industry-leading expertise in the restaurant and social dining segments. The combined group will provide a platform for further growth and innovation. This is just the start of an exciting journey together."