Proxy advisor recommends shareholders oppose Restaurant Group’s Wagamama takeover on the eve of the vote

An influential shareholder group has recommended investors oppose the Restaurant Group’s £600m takeover of Asian fusion chain Wagamama on the eve of the vote.

Pensions and Investment Research Consultants (Pirc) said the “risks and adverse implications for shareholders appear too great to overlook”.

The proxy advisor's recommendation comes as investors prepare to cast their votes at a general meeting tomorrow, with shareholders divided on the best outcome.

Columbia Threadneedle Investments and another top ten shareholder, who declined to be named, have voiced their opposition on grounds of price. 

Grizzlyrock Capital and Vivaldi Asset Management, which collectively hold 1.9 per cent of shares, have also confirmed they will oppose the proposals. 

However, Schroders, Royal London Asset Management, J O Hambro and a top five shareholder have come out in support of the deal. 

"It’s all to play for,” said Mark Brumby, chief executive of leisure specialist advisory Langton Capital. “You couldn’t call it either way.”

“The negative reaction of the market is a point of concern, reflected in the significant decline in the company’s share price since the announcement of the acquisition,” Pirc’s note to shareholders said.

“Furthermore, the dilution of shares that will come about as a result of the Rights Issue is another concern shareholders will have to take into account.

“An additional concern is the considerable incurrence of debt that will be brought about upon the realisation of the acquisition, which will further add to the burden shareholders will bear.

"The board has not adequately addressed the risks associated with such a high level of debt.”

Other proxy advisors, including IVIS, Institutional Shareholder Services (ISS) and Glass Lewis, have recommended that investors back the proposals.

City A.M. has contacted The Restaurant Group for comment.