, 25 tweets, 9 min read
So inspired by rumours that Pizza Express might fold (arf arf), I've done some digging into Pizza Express's corporate history.

And it's a FASCINATING story of how solid businesses get crippled by debt to make a few people rich.
Pizza Express was a mainly London-focused restaurant business until 1992.

When a pair of entrepreneurs called Luke Johnson and Hugh Osmond bought it for £15m.

(N.B. it's been in & out of so many hands it's v hard to find hard number sources.)

If Luke Johnson & Hugh Osmond sound familiar then that's because...

Luke Johnson is the private equity genius who presided over Patisserie Valerie (we all know how that turned out.)

Hugh Osmond parted with Johnson in 1997 to found Punch Taverns.

He was also a private equity genius for a hot minute.

Then it emerged he'd run up £3bn in debt and the pubs got sold to Heineken for £403m

And what happened to Peter Boizot, the man who founded Pizza Express & exited the company with a reported £33m?

He spent it all on art, a hotel and trying to make Peterborough United a thing. His estate was £0 after probate when he died in 2018.

But how did Johnson & Osman engineer a £15m transaction into a company that later traded for 100s of millions?

With a reverse takeover.

This means they took over a shell company called Star Computing (wtf?!) and became a PLC without an IPO.


In 1992, Pizza Express was trading at a pre-tax loss of £0.5m inc some property writedowns (back then we were coming out of a horrible property correction).

Pizza Express is a restaurant business, and restaurant businesses are VOLATILE.
But why do a reverse takeover?

Well, publicly listed companies have an advantage over private companies in one key respect.

They can access a wider range of 'alternative financing options'.

Which means they can accumulate more debt.
Pizza Express was a PLC for 10 years and grew significantly in footprint & ambition but the group's profits were never staggering.

It made £20m in 2002, and sales grew by a disappointing 3%

Look at this piece from the Evening Standard in 2002.

Pizza Express has "lost its appeal" with consumers and is in financial trouble.

(I have been reading this sodding story my whole adult life.)

Thing started to get *really* interesting in 2002.

By then, Pizza Express was "troubled".

Former owner Hugh Osmond (remember him) tried to buy the chain and take it private for £250m.
Osmond's bid was backed by two private equity firms, Sun Capital & Capricorn Ventures.

This bid collapsed and Osmond withdrew.

But Capricorn had another go with TDR and bought Pizza Express for £278m in 2003.

So Pizza Express was a private company again.

But importantly it was a private company owned by private equity funds.

If you don't know how private equity is supposed to work, here's a short explainer...

The private equity guys did a textbook private equity job on Pizza Express.

They also bought Ask and Zizzi & put all three businesses into one group, Gondola Holdings. They engineered cost savings at group level...

And floated it for £900m.

There was a ticking timebomb in that £900m flotation though.

The actual company was valued at £560m
The remaining £350m was DEBT.
After less than a year on the stockmarket, Pizza Express (still part of Gondola) went private AGAIN.

An entity called Paternoster, which was put together by Cinven, another private equity company.

It valued the company at £560m & took on the debt.

Cinven (via Gondola) held Pizza Express between 2006 & 2014.

(That's a LONG time in private equity. But there was a massive financial crisis in the middle.)

In 2009, the group's debt was nearly £1 billion

And so when the market started recovering, Gondola started exiting...

It sold Byron in 2013
Ask & Zizzi followed in 2014

And Pizza Express went in 2014 as well.

In 2014, a firm called Hony Capital bought Pizza Express for £900m.

Yet another private equity deal, but what was interesting was where the money came from. China.

This was the high watermark period of Chinese capital acquiring overseas businesses.

With Hony in charge, Pizza Express was supposed to become a truly international brand*

*again - it's had a few abortive tries over the years.

And what happened?

MOAR debt. The company's 2017 annual report is already quoting total debt for Pizza Express as more than £1bn.

So this is where we are.

Pizza Express is living with an intolerable debt load and may fold (I too am deeply tired of the calzone jokes) taking thousands of jobs with it.

But why is Pizza Express failing?

It's not because the underlying business is unsound. It's been in roughly the same shape SINCE THE EARLY 1990s.
Pizza Express is in trouble because it's been financially engineered EVERY WHICH WAY and every time it changes hands more debt gets added to the company balance sheet.


1 buyout
2 IPOs
3 highly leveraged PE buyouts

I'm stunned there's anything left.
Pizza Express isn't a failure, it's an astonishing success.

It's a business that's had been subjected to every perverse, bizarre and ill-starred financial engineering idea in the past 30 years and survived.

And they did all that by selling pizza.

(Thank you.)
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