Pizza chain Ask Central admitted last week that it was in merger talks with debt-laden City Centre Restaurants (CCR). A joint announcement stated that discussions were still at an early stage, but the boards of both businesses believe a merger would be beneficial for shareholders.
Adam Kaye, chief executive of Ask, commented: "We've got experience in the high street, and City Centre has cornered the cinema and airport markets, so it's a natural match."
Kaye also indicated the possibility of converting CCR's underperforming sites to Ask or Zizzi brands should the merger go ahead.
It's understood the merger would take the form of a recommended offer to Ask Central's shareholders at a premium to the current share price. The offer would be funded by a mixture of City Centre shares and cash subject to the normal due diligence process.
Kaye said he and his brother Sam Kaye, who started the pizza chain back in 1993, would definitely stay on as management should the plans go ahead. "We will absolutely be involved," he said.
The Kaye brothers sold six million shares in September in a deal which made them £4.4m each. They still own 3.45 million shares, equivalent to about 3.63% of the company.
If the merger goes ahead, the enlarged group would control just under 400 restaurants.
While Ask Central owns the profitable Ask Pizza, Zizzi and the recently opened Jo Schmo's brands, CCR, which operates brands like Frankie and Benny's, Est Est Est and Chiquitos, holds £40m of debt.
A joint statement said the boards of CCR and Ask believed a merger would give enhanced growth prospects and take a leading position in the UK casual dining market.