Patisserie Valerie is preparing to tap investors for tens of millions of pounds as it bakes a takeover bid for the company that owns Gail’s, the chain of artisan cafes.
Patisserie Holdings, which is listed on the London Stock Exchange, is drawing up plans for a placing of new shares to raise about £35m towards the cost of a deal, reports Sky News.
The company’s current market value is just over £350m, meaning that if it took place now, a £35m placing could be organised without giving existing shareholders the right to pre-empt it.
Leading Patisserie Holdings shareholders are likely to be enthusiastic about such a fundraising, given the stock’s performance since it floated and the fact that the company’s executive chairman – restaurant tycoon Luke Johnson – also owns Gail’s parent, Bread Holdings.
A deal is unlikely to be agreed until March, according to insiders, and Mr Johnson is not involved in the negotiations because of the potential for his dual role to create a conflict of interest.
The entrepreneur’s private equity firm, Risk Capital Partners, hired advisers in the autumn to explore options for a sale, and other prospective bidders are said to have expressed interest in the chain.
Some industry-watchers have suggested that Bread Holdings could command a price tag of more than £150m.
A lucrative exit would be the latest in a long line of paydays for Mr Johnson from hospitality businesses.
He owns 39% of Patisserie Holdings, although it is unclear whether he would participate in a fundraising enabling it to buy the owner of Gail’s.
Mr Johnson made a fortune from the expansion of Pizza Express, and has owned casual dining chains such as Strada.
Risk Capital holds a majority stake in Bread Holdings, alongside the bakery group’s management, including Tom Molnar, chief executive.
Mr Molnar established the business with Ran Avidan, naming it after Gail Mejia, who was a supplier of premium bread to restaurants.
Its first site opened in Hampstead, north London, in 2005.
The company, which now trades from nearly 40 Gail’s-branded outlets, has grown significantly since Mr Johnson invested in 2011.
Its retail operations are concentrated in affluent London locations with high footfall, and it has further plans to expand both retail and wholesale operations.
Bread Holdings’ success comes at a time when many bakery owners are struggling with higher input prices exacerbated by the weak pound.