Shares in Restaurant Group (RTN) have been on a tear over the last nine months, gaining 84% after positive trading updates and a strategic review of the business prompted in part by activist investors pushing for change.

The company has now agreed to offload its underperforming leisure division (principally Frankie & Benny’s and Chiquitos) to the Big Table Group which operates brands including Café Rouge, Bella Italia and Las Iguanas.

Selling a business usually involves the buyer forking out cash, but in this instance the seller is paying the buyer £7.5 million to take the business off its hands.

Restaurant Group’s share price rallied 6% on the news as the sale is expected to accelerate margin expansion by more than 1% in the first year after completion (expected end of October) and remove around £50 million of lease liabilities from the balance sheet.

There was also some relief that the company wasn’t forced to sell its better-performing brands to tempt potential buyers for the leisure business.

Leisure analyst Greg Johnson at Shore Capital described the sale as a ‘significant milestone’ for the group. The disposal removes a financial drag and gives management more time to focus on the growing parts of the business, namely Wagamama, the Brunning & Price posh pubs and the airport concessions.

The big question now for investors is whether the leisure arm sale and the stepping down of chairman Ken Hanna earlier in the month is enough to appease activist investor Oasis Management.

On the same day as the proposed sale was announced Oasis revealed it had increased its shareholding in Restaurant Group to just under 16% from 9%. It is possible the activist could push for a wider break-up of the group.

According to group editor Mark Wingett of industry intelligence group Propel, investment bank Lazard & Co which advised on the leisure sale has also done some work on the potential sale of Brunning & Price but concluded the business would not fetch fair value which is thought to be around £220 million.

Analysts at Liberum updated their sum-of-the-parts model which places a multiple of 10 times EBITDA (earnings before interest, tax, depreciation and amortisation) on the pub estate, implying
a value of £200 million. Liberum estimates Restaurant Group is worth 75p per share on the same basis, compared to a 49.2p share price at the time of writing.

Speculation may now turn to the concessions business with possible interest coming from outsourced catering company Compass (CPG) and food travel expert SSP (SSP).

A strong recovery in passenger volumes at UK airports saw the group’s concessions arm record a 150% rise in first half EBITDA to £6.8 million.

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