by The PMA Team
Two private equity bidders are known to have joined Yates and Laurel owner Robert Tchenguiz in bidding for troubled Slug & Lettuce operator SFI Group.
The two private equity bidders are thought to have tabled a bid for just 100 of the company's 157 sites the offer excludes the 50 or so sites at SFI that are losing money. "It's quite a clever way of dealing with the SFI estate and unlocks a lot of value," said one observer.
Acceptance of the private-equity offers would mean that SFI itself would be placed into receivership by its banks. Some observers wonder whether this would be palatable for its banks, given the chequered history of the company, which has seen shareholders lose the vast majority of their investment in the company.
"There are reputational issues for the banks in putting this company into receivership," said one source. It is believed that Yates Group and Tchenguiz have bid for the whole of SFI, with negotiations on returning loss-making sites to their property landlords if their bids are accepted.
The tail of loss-making sites at SFI Group is much longer than many expected. "Some of SFI's sites are losing more money than their rent figure and would be better off closing. Most operators have a tail that makes up 10% of their sites but in SFI's case it represents a good one-third of the estate."
Slug & Lettuce is the strongest brand at SFI, producing two-thirds of the company Ebitda of £8.3m. Earnings at the Bar Med chain are marginally positive, but there are sites that make a combined loss of £1m per annum.
It is believed that Yates Group sees synergies between Slug & Lettuce and Ha! Ha! Bar & Canteen and would think about putting the two brands in a separate division.
Robert Tchenguiz's interest in SFI has surprised some observers because of his usual interest in pub estates with some freehold content. The eventual sale price of SFI is likely to be less than its £80m debt. Two of its bank sold their debt in SFI last autumn, for around 70% of face value, to debt trading companies.