The former management team of La Tasca, the Spanish tapas bar chain, has secured private equity funding to buy Ego, a Mediterranean restaurant concept, and develop it into a national chain.

James Horler, who quit as chief executive of La Tasca after its sale to Robert Tchenguiz a year ago for about £136 million, is leading the buy-in of Ego, which is based in northwest England.

LDC, the private equity arm of Lloyds TSB, is supplying £9.1 million of equity and loan stock in return for a 58 per cent stake.

The money will fund acquisition of the fledgeling chain from its founders, Jason Ellison and Jonathan Poole, and the rollout of a further 38 outlets over the next four years.

Mr Horler, who becomes executive chairman of Ego, and five colleagues will take a combined 42 per cent stake by investing some of the money that they made from the La Tasca sale.

John Barnes, the former chairman of La Tasca, becomes a non-executive director.

Mr Horler, who also ran the Frankie & Benny's chain for The Restaurant Group, said that Ego would initially focus on suburban areas in the North and Midlands, including Nottingham and Leeds.

He said: “There is a lack of quality casual dining, table-service restaurants in suburban locations. These are places that the big national brands haven't got to and probably won't get to.”

Ego, which has an average net spend per head of £19, was aimed at the over-40s “who don't want to have to go into the city centre to find a decent restaurant”.

It has five outlets in the North West — in Chester, Liverpool, Heswall, Stockton Heath and Bramhall — and will soon open its first in the Midlands, in Lichfield.

Mr Horler said that once the group reached ten sites it would seek to raise debt funding, and that he was confident the business would be able to ride out a fall in consumer spending, arguing that restaurants were “a reasonably safe bet”.

Craig Armour, senior director at LDC, is handling the deal. In his previous job at Penta Capital he backed Mr Horler and Mr Barnes in the £27.2 million buyout of La Tasca in 2001. Four years later, it floated with an enterprise value of £71 million.

Times Recommends

• Unemployment rises at fastest rate in 17 years
• Alchemy leads in Fraser and Mosaic bid talks
• US and UK shares slump as recession looms