Clapham House, the AIM-listed restaurant operator of the Gourmet Burger Kitchen (GBK) chain, has sold its Bombay Bicycle Club (BBC) line for £4.4 million (Rs.37.8 crore) to Gourmet Restaurants, the company that owns Tiffinbites, a rival Indian restaurant chain. On this news, Clapham House saw its shares rise more than 10 per cent to 89p.

Gourmet Restaurants intends to use the BBC purchase as the platform for consolidation of the fragmented Indian restaurant market. Although the sale was considered imminent, earlier price estimates had been as high as £10 million. However, Clapham chairman David Page justified the business logic behind the deal - "Given that we paid one or two million for it, £4.4 million isn't bad."

He said the group plans to use the proceeds of the sale to reduce existing bank debt and fund the ongoing development of its GBK chains. The group, which also owns Tootsies and The Real Greek, plans to open nine GBK's this year - down from the 16 new restaurants previously planned.

Jamal Hirani, the Gourmet Restaurants founder and chief executive, has four Tiffinbites sites in London and recently acquired the Vama restaurant in Chelsea. It has closed Tiffinbites sites in Soho, Cannon Street and at the Bullring in Birmingham. It said it has no plans to merge the BBC with its other brands.

Clapham bought the London-based BBC business four years ago for up to £2.42 million when it consisted of a restaurant in Balham plus five home delivery outlets. Today, it has expanded to three restaurants and 15 delivery kitchens.
 
Earlier this month, Clapham House revealed that it was forced to write down the value of some of its sites and scale back its expansion plans for GBK, after pre-tax profits tumbled by more than a third last year amid the slowing UK economy.

It admitted that the BBC had recorded a pre-tax loss of £484,000 in the year to the end of March, helping to pull overall pre-tax profits down to £928,000. The hit came despite a 30-per cent increase in revenues to £59.5 million after the opening of 24 sites over the year. BBC currently has assets worth £2.4 million.

Page said at the end of last month that the company frequently fielded interest in its brands. "Over the years we have received multiple offers for every brand we have. We said when we floated that we'd sell at the right time."

Clapham itself has also been the subject of bid speculation as Capricorn Ventures International, the owner of the Nando's chicken chain, has built a stake of 25 per cent. Gondola Group, the PizzaExpress and ASK operator, has also been tipped as a suitor.

This morning, Campbell Clapham House CEO Paul said, "'Whilst we are sad to see the Bombay Bicycle Club leave our portfolio, it is predominantly a home delivery business with a different pricing point and a longer period for return on capital than our other brands.''

"We believe that at the current time it is appropriate to strengthen our balance sheet and focus resources on our pure restaurant businesses, Gourmet Burger Kitchen, Tootsies and The Real Greek," he added.

The sale of BBC, which is also believed to have attracted interest from AIM-listed Indian Restaurants Group, will force Clapham to take a £1.9 million hit against the carrying value of the goodwill.

Analysts welcomed the deal, arguing that the reduction in debt £18 million to £14 million gave Clapham House greater flexibility to roll out its higher-return GBK brand. The group's three remaining restaurant chains all offer average meals at £10 a head and are seeing no evidence of a slowdown, according to Page. "We're all waiting for this avalanche to hit us - but three weeks ago we had a record week at GBK," he concluded.

Tiffinbites was founded by Jamal Hirani and Jonathan Marks who met at Marks & Spencer where they were buyers, and saw an opportunity in selling healthy Indian food to City workers.

"I was working in the City and missing my mum's cooking," Hirani has said. Tiffinbites now delivers 2,000 lunches daily to big company offices such as O2 in Slough and Barclays Capital in Canary Wharf.