Thu 16th Feb 2023 - Oasis urges The Restaurant Group to take immediate steps to restore market confidence Oasis urges The Restaurant Group to take immediate steps to restore market confidence: The Restaurant Group’s (TRG) shareholder Oasis Management has gone public with its call for the owner of the Wagamama restaurant chain to “re-align its priorities” and take immediate steps to restore market confidence. The hedge fund, which manages private funds that own 6.5% of the company, said it wanted the Andy Hornby-led TRG to engage with its shareholders to explore all options for a management change in the near term. Oasis said it firmly believes in the underlying value potential of TRG’s core brands and “emphasises its long-term commitment to the company”. It has called on TRG to communicate to the market the strategic direction of the company and means of value creation. Further to this, it said the business should engage with shareholders on all options for “meaningful governance change in the near-term to promote this value creation and alignment with shareholders”. The hedge fund said: “Oasis has been engaging with TRG for several years based on a firm belief that the company possesses a strong portfolio of core assets, including Wagamama, the restaurant chain, and Brunning & Price, the pub group. However, despite the considerable value of these assets, TRG has one of the worst performing share prices of any UK leisure company; materially worse than its closest peers, and disproportionately worse than what the impact of the challenging sector backdrop would alone justify. The poor shareholder experience of this long-term decline in market value is further exacerbated when taking into account the company’s three equity raises since 2018, with proceeds totalling £547m. Since the close of the latest of these rounds in March 2021, the share price has fallen approximately 65%, reducing the company market capitalisation to around £265m, just half of the combined proceeds raised. Since the close of the first raise in 2018, used to fund the acquisition of Wagamama, the share price has plummeted approximately 70%. 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. 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 recapitalize 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. This crisis of confidence casts significant doubt over the ongoing strategic decision-making by the board in its current form unless there is a meaningful recovery of market confidence that the board is aligned with the shareholder perspective. Oasis believes this presents a compelling rationale for significantly improved board-level oversight and strategic guidance at TRG, to urgently re-align the board’s priorities. This message has been conveyed to the TRG board but has thus far been rejected out of hand suggesting the motivation to address the concerns is not currently shared. This reception has ultimately led to Oasis’ decision to open the discussion publicly. We implore the board to urgently discuss with its shareholders the necessity for meaningful, immediate and near-term governance change at TRG to promote alignment with the shareholder perspective. Oasis further urges the board to improve its communication with the market by providing guidance on the strategic direction of the company and means of value creation, appreciating the necessity for transparency in realising a more efficient market appraisal of underlying company value and promoting the opportunity for strategic outcomes in full market view. Oasis firmly believes that these steps will begin to allow the board to renew focus on long-term value creation; failure to recognise this and work with stakeholders who are committed to TRG’s future, will increase the risk of further deteriorating public market interest and leave shareholders with no recourse but to seek to hold its representatives to account.” TRG has so far declined to comment.