A slice of a shrinking pie
Private equity firms are enjoying rich stock-market pickings, says Matthew Vincent, but small investors don’t have to be satisfied with scraps Imagine, if you will, a pizza restaurant run by Basil Fawlty. You order a large Quattro Stagione with a Waldorf salad on the side but, when it arrives, it’s a lot smaller than you expected and, before you can take your first bite, it’s whisked away amid much flailing of arms and manic muttering of ‘chef’s not sure of the recipe ... we’re right out of Waldorfs ... , ... you just can’t get the staff ... terribly sorry, pizza’s off’. You’re promised a refund but soon you find a rather furtive waiter serving you a bigger pizza than the one you first ordered. When you finally get the bill, you discover you were charged £7 for the first pizza, refunded a meagre £2.78, then asked to pay another £9 for the second one. If that sounds vaguely familiar, you’re either a devotee of Fawlty Towers or a nonetoo-amused Pizza Express investor from the late 1990s. That’s because this is pretty much the experience of the restaurant chain’s shareholders. Anyone who bought into the chain when its share price peaked in 1998 owned a slice of a company worth more than £700 million. Just four years later its value had shrunk by three quarters, and in 2003 the shareholders were bought out by private equity firms TDR Capital and Capricorn Ventures for £278 million. But then last November the restaurants, now merged with the ASK Central chain, were refloated on the stock market in a share offer that valued the new company at up to £900 million.
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