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Pizza Hut’s biggest UK restaurant franchisee is closing in on a rescue deal that would salvage the vast majority of its British outlets and jobs.

Sky News has learnt that Directional Capital, an investment firm which already controls much of Pizza Hut’s dine-in operations in Denmark and Sweden, is in advanced talks to acquire roughly 140 sites in the UK.

A deal, which could come as early as Wednesday, would be structured as an acquisition of Heart With Smart (HWS), the main franchise-holder, by Directional Capital.

Financiers said there was a strong possibility the transaction would be implemented through a pre-pack administration of HWS.

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They added, however, that an insolvency of the corporate entity would not lead to substantial numbers of site closures or job losses.

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Only a handful or so of the chain’s existing outlets – at most – were at risk of being axed, they said.

HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant operators in Britain’s casual dining industry.

If completed, a deal would bring a successful end to a sale process which has been running since the aftermath of Rachel Reeves’s budget in late October.

Insiders told Sky News in November that increases to employers’ national insurance contributions (NICs) which come into effect in April would add approximately £4m to HWS’s annual cost-base – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.

A bag of KFC chicken in London. The new storage hub at the centre of KFC's chicken delivery problems has not yet been granted the registration it legally requires to operate, the local council has confirmed.
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HWS licenses the Pizza Hut name from Yum! Brands, KFC’s owner

HWS is owned by a combination of Pricoa, a lender, and the company’s management, led by chief executive Jens Hofma.

They led a management buyout reportedly worth £100m in 2018, with the business having previously owned by Rutland Partners, a private equity firm.

HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.

Interpath Advisory has been overseeing the sale process.

Even before the budget, restaurant operators were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.

Sky News also revealed during the autumn that Pizza Express had hired investment bankers to advise on a debt refinancing.

HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.

Directional Capital, however, is understood to own two of Pizza Hut’s UK delivery franchisees.

Accounts filed at Companies House for HWS4 for the period from December 5, 2022 to December 3, 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.

The terms of the same facilities were also extended to September 2027, while it also signed a new ten-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.

“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.

It added: “The costs of business remain challenging.”

Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.

In 2020, the company announced that it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement (CVA).

At that time, it operated more than 240 sites across the UK.

HWS and Interpath declined to comment on Monday evening, while Directional Capital could not be reached for comment.

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Apollo charges in for stake in £7bn petrol retailer Motor Fuel Group

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Apollo charges in for stake in £7bn petrol retailer Motor Fuel Group

The investment giant Apollo Global Management is close to snapping up a stake in Motor Fuel Group (MFG), one of Britain’s biggest petrol forecourt empires, in a deal valuing it about £7bn.

Sky News has learnt that Apollo could announce as soon as Thursday that it has agreed to buy a large minority stake in MFG from Clayton Dubilier & Rice (CD&R), its current majority-owner.

The transaction will come after several months of talks involving CD&R and a range of prospective investors in a company which is rapidly expanding its presence in the electric vehicle charging infrastructure arena.

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Banking sources said there had been a “large appetite” to invest in the next phase of MFG’s growth, with CD&R having built the company from a mid-sized industry player over the course of more than a decade.

Lazard and Royal Bank of Canada are understood to be advising on the deal.

A stake of roughly 25-30% in MFG has been expected to change hands during the process, with Apollo’s investment said to be broadly in that range.

MFG is the largest independent forecourt operator in the UK, having grown from 360 sites at the point of CD&R’s acquisition of the company.

It trades under a number of brands, including Esso and Shell.

CD&R, which also owns the supermarket chain Morrisons, united MFG’s petrol forecourt businesses with that of the grocer in a £2.5bn transaction, which completed nearly 18 months ago.

MFG now comprises roughly 1,200 sites across Britain, with earnings before interest, tax, depreciation and amortisation (EBITDA) of about £700m anticipated in this financial year.

It is now focused on its role in the energy transition, with hundreds of electric vehicle charging points installed across its network, and growing its high-margin foodservice offering.

MFG has outlined plans to invest £400m in EV charging, and is now the second-largest ultra-rapid player in the UK – which delivers 100 miles of range in ten minutes – with close to 1,000 chargers.

It aims to grow that figure to 3,000 by 2030.

CD&R, which declined to comment on Wednesday afternoon, will retain a controlling stake in MFG after any stake sale, while Morrisons also holds a 20% interest in the company.

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Bankers expect that the minority deal with Apollo will be followed a couple of years later with an initial public offering on the London stock market.

CD&R invested in MFG in 2015, making its investment a long-term one by the standards of most private equity holding periods.

The sale of a large minority stake at a £7bn enterprise valuation will crystallise a positive return for the US-based buyout firm.

CD&R and its investors have already been paid hundreds of millions of pounds in dividends from MFG, having seen its earnings grow 14-fold since the original purchase.

Morrisons’ rival, Asda, has undertaken a similar transaction with its petrol forecourts, with EG Group acquiring the Leeds-based grocer’s forecourt network.

EG Group, which along with Asda is controlled by private equity firm TDR Capital, is now being prepared for a listing in the US.

Apollo declined to comment.

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Sainsbury’s blames Visa card issues for online payment failure

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Sainsbury's blames Visa card issues for online payment failure

J Sainsbury, the supermarket chain, was on Wednesday racing to resolve an issue with card payments made involving Visa and Barclays which was impacting customers’ ability to pay for online grocery orders.

Sky News understands that Sainsbury’s is working with Visa and Barclays to address the issue after a number of shoppers reported that their card payments had failed.

A Sainsbury’s spokeswoman initially said Visa card payments were to blame for the problems, with the retailer subsequently updating its position to say the technical issue actually rested with Barclays.

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The grocer ruled out the possibility of a cyberattack and said its website and app were functioning normally, with no direct impact on customers.

The issue nevertheless illustrates the extent to which the industry is on high alert for cybersecurity-related incidents after a spate of attacks which have raised concerns about the sector’s resilience.

In recent months, major British retailers including Marks & Spencer, the Co-op and Harrods have been the victim of cyberattacks, with the impact on M&S particularly acute.

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M&S has said the attack on its systems would cost it at least £300m and forced it to suspend online orders for months.

The Co-op saw in-store availability of thousands of products disrupted for several weeks.

A Sainsbury’s spokesperson said, “We’re working with one of our payment providers to resolve a temporary issue processing some payments for our Groceries Online service.

“We continue to deliver orders for customers and our website and app are working as normal.”

Visa said: “”Visa systems are operating normally. We are working with our partners to help them investigate.”

Barclays has been contacted for comment.

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Gary Neville hits out at national insurance rise – and makes prediction for Manchester United’s season

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Gary Neville hits out at national insurance rise - and makes prediction for Manchester United's season

Gary Neville has criticised the government’s national insurance (NI) rise this year, saying it could deter companies from employing people and “probably could have been held back”.

The former Manchester United and England footballer-turned business owner, who vocally supported Labour at the last election, employs hundreds of people.

But he expressed his frustration at the recent hike on employers’ NI, which has significantly increased the taxes businesses have to pay for their employees.

Speaking to Sky News’ Business Live, Neville said: “I honestly don’t believe that, to be fair, companies and small businesses should be deterred from employing people. So, I think the national insurance rise was one that I feel probably could have been held back, particularly in terms of the way in which the economy was.”

While the Sky Sports pundit thought the minimum wage increase introduced at the same time was necessary to ensure that people are paid a fair wage and looked after, he made it clear the double whammy for businesses at the start of April would be a challenge for many companies big and small.

“I mean look it’s been a tough economy now for a good few years and I did think that once there was a change of government, and once there was some stability, that we would get something settling,” he said. “But it’s not settling locally in our country, but it is not settling actually, to be fair, in many places in the world either.

“I don’t think we can ever criticise the government for increasing the minimum wage. I honestly believe that people, to be fair, should be paid more so I don’t think that’s something that you can be critical of. I do think that the national insurance rise, though, was a challenge.”

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Neville’s business interests are diverse, spanning property development, hospitality, media, and sports.

He co-founded GG Hospitality, which owns Hotel Football and the Stock Exchange Hotel, and is involved in Relentless Developments, focusing on building projects in the North West. He is also a co-founder of Buzz 16, a production company, and a partner in The Consello Group, a financial services company.

The tax increase is expected to raise £25bn for the Treasury, with employers having to pay NI at 15% on salaries above £5,000, and up to 13.8% on salaries above £9,100.

The rise has already led the Bank of England to warn that it is contributing to a job market slowdown.

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Governor Andrew Bailey warned last month that “the labour market has been very tight in the past few years, but we are now seeing signs that conditions are easing, employment growth is subdued, and several indicators of labour demand and hiring intentions have softened”.

The government has defended the tax increase, announced by Rachel Reeves in last year’s budget and implemented in April, arguing that the money was needed to pay for public services like the NHS to help bring down waiting lists.

‘Can’t get any worse’ for Man Utd

Neville conceded that turning beleaguered football club Manchester United around could prove more difficult than trying to bring about substantial economic growth.

The side finished 15th last season – its worst performance in the history of the Premier League.

“Yeah, that could be a bigger challenge than the economy… I think the two signings are good signings yet, there’s a couple more needed,” Neville said of his former club’s fortunes.

“I think they need a goalkeeper. And I think if they fill those two positions with decent signings, then United can have a lot, I mean, they have to have a better season than last year. It can’t get any worse, really.”

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