Wagamama owner faces shareholder revolt over pay and appointments

Activist hedge funds have led a shareholder revolt over executive pay and appointments at Wagamama owner The Restaurant Group, the latest clash in a campaign to shake up and partially sell the struggling casual restaurant operator.

Just over 45 per cent of votes cast at TRG’s annual general meeting on Tuesday opposed the company’s pay report, which includes chief executive Andy Hornby’s £675,000 pay as part of a remuneration package that allows for a share grant of up to 150 per cent. on top of his salary, regardless of stock performance.

Hornby’s re-election to the board was also opposed by about 16 percent of the votes cast, while almost a quarter of them voted against the reappointment of chairman Ken Hanna and Zoe Morgan, the director who heads the company’s compensation committee.

The mutiny at the AGM is the latest development in an increasingly bitter fight over TRG’s future direction, which began earlier this year when Hong Kong-based fund Oasis Management disclosed its stake in the company and complained about TRG’s ailing share price.

A number of other funds have since bought shares and have gone further than Oasis in calling for TRG’s operations – which include Frankie & Benny’s Italian-American restaurant and pub chain Brunning & Price – to be broken up and sold.

According to Hanna, activists own between 15 and 20 percent of the shares – chief among them Oasis, which is the second largest shareholder with a 12.3 percent stake. Activists Irenic Capital and Coltrane are also among the top 20 shareholders.

At the meeting, Hanna described the activist funds as a “vocal minority”. Fund manager Columbia Threadneedle, TRG’s largest shareholder, publicly supports management. “Our job as a board is to try and . . . let everyone be happy. It’s never easy, but we’ll navigate through it,” Hanna said.

However, Hanna indicated that management may be receptive to some of the activists’ demands, saying that “we will disclose our strategy in due course.”

TRG’s stock price has fallen more than 60 percent since its last stock raise in March 2021, as the casual dining operator grapples with rising costs and concerns about a consumer slowdown.

Adjusted pre-tax profit for the group was £20.3m last year, up 22 per cent on a year earlier, when the business was hit by pandemic restrictions. However, like-for-like sales at Frankie & Benny’s, which announced the closure of 35 locations in March, fell 4 percent year-on-year.

But Hanna did not silence her opponents. Orkun Kilic, the founder of Berry Street Capital, which owns about 1 percent of the shares, told the Financial Times that the board “does not respect shareholder and stakeholder value.”

According to Kilic, the sale of some of TRG’s assets was “obviously necessary”, but argued that management was “conflicted within themselves because they think about their place and their ego”.

Daniel Wosner, managing director of Oasis, said he was “delighted” that shareholders had “stepped up with power to share their dissatisfaction [over executive pay]”.

But Kilic, who previously ran an activist campaign for Oasis focused on manufacturer Premier Foods, said he feared there could be a “stalemate” between activists and management unless an asset sale happened soon.

In a statement, TRG acknowledged the “significant” shareholder revolt, saying the company would continue to consult with investors to find an “appropriate solution” to the payment. “We remain firmly focused on executing our margin expansion plan,” he added.