Business World

Tuesday 12 December 2017

Tesco pays €58m for child-friendly restaurant chain Giraffe

Tesco and Lidl have rowed back on a decision to increase the price of their own brand milk
Tesco and Lidl have rowed back on a decision to increase the price of their own brand milk

Holly Williams

SUPERMARKET giant Tesco is to buy the Giraffe child-friendly restaurant chain for up to £50m (€58m) 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 54pc, 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 49pc 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 1.8pc 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 0.5pc 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, near London

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 that 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 49pc 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".

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