Mar 13 2013
Supermarket giant Tesco is to buy the Giraffe child-friendly restaurant chain for up to £50 million in a move that will see it open the eateries across its stores.
The deal will net a hefty windfall for Giraffe founders Juliette and Russel Joffe and Andrew Jacobs, who together with other management and long-standing investors will sell their combined stake of around 54%, according to The Times.
Tesco is hoping the acquisition of the 47-strong business will reinvigorate its UK arm, which has been battling to shore up flagging sales.
As well as adding a family dining business to Tesco's portfolio, the acquisition will pave the way for Tesco to add Giraffe restaurants to its larger stores and attract more shoppers.
The grocery group recently bought a 49% stake in Harris + Hoole coffee shops with aims to open branches in its shops, while it has also backed Euphorium Bakery.
Tesco suffered a difficult 2012 when it reported its first drop in profits for two decades. While sales improved over Christmas, growing by 1.8% in the six weeks to January 5, the horse meat scandal is expected to have taken its toll on trading in recent months. Shore Capital analyst Clive Black is predicting 0.5% growth at best in the group's fourth quarter.
Tesco declined to comment on the Giraffe deal.
The restaurant chain was founded in 1998, when its co-founders opened their first outlet in Hampstead. It has since secured backing from 3i, which bought a stake in 2006, and former PizzaExpress chairman Luke Johnson, who also chairs Giraffe. Giraffe is set to open its 48th restaurant in Leeds Trinity shopping centre this month. It is understood the Giraffe co-founders and management team will be retained by Tesco following the deal.
Philip Dorgan, analyst at Panmure Gordon, said: "Tesco - along with the other food retailers - has been very bad at in-store catering for a very long time and this appears a logical move, especially in combination with its acquisition of a 49% stake in Harris + Hoole."
He added that with online shopping increasing in popularity, the group needs to "invest in areas that its shoppers will want to spend time doing when they spend a lot less time shopping - eating out is clearly one".