Mark Slater, whose firm Slater Investments owns a 10.4% stake in Loungers, has told The Times he will reject the takeover, arguing that ‘it’s the wrong time to be trying to sell a very good business of this kind’.
It was announced yesterday (28 November) that Loungers is set to bought by US-based investment firm Fortress, whose UK portfolio also includes Punch Pubs, Majestic Wines, and Vagabond, in a deal that values the all-day café and restaurant group at approximately £338.3m.
Under the terms of the acquisition, each Loungers shareholder will be entitled to receive 310p in cash for each share, with an alternative option to participate in an unlisted share alternative in respect of some or all their Loungers shares.
The cash offer represents a premium of approximately 30.3% to the closing price of 238p per Loungers share on 27 November 2024.
Dan Harlow, head of UK Equity at AXA Investment Managers, also told The Times he intends to vote against the deal, echoing Slater’s point.
He said that management’s frustration with the share price ‘is no excuse to throw the towel in at what we consider could be the darkest hour’.
To see the company exit public markets now is ‘galling’, he added, arguing that the offer ‘appears to be another opportunistically priced bid’.
Other major shareholders, however, have signalled they will back the deal.
They include Canaccord Genuity Asset Management, which has signed a non-binding letter of intent to vote in favour of the acquisition in respect of, in aggregate, 1,755,500 Loungers Shares, representing approximately 1.7% of the existing issued ordinary share capital of Loungers.
News of sale came as Loungers, whose portfolio includes the Lounge, Cosy Club and Brightside brands, reported total revenue in the 24 weeks to 6 October 2024 of £178.3m, up 19.2% on the previous year (£149.6m).
Adjusted EBITDA rose 25% to £29.8m (2023: £23.7m) while pre-tax profits reached £5.95m, a rise of 51.3% on the previous year.
In a trading update in early October, the group said it was ‘continuing to outperform the broader UK hospitality market’.
“We remain very confident about Loungers’ future prospects and the half year results that we announced separately today clearly demonstrate the strong momentum that we have in the business,” Alex Reilley, the chairman of Loungers, said yesterday.
“Loungers has come a long way since we opened our first site in Bristol in 2002, and we are hugely proud of the jobs we’ve created, the positive impact we’ve made on the UK’s high streets, and the outstanding hospitality our amazing teams have provided since then.”
As of 27 November 2024, Loungers had a total of 280 sites in its portfolio across its three brands with the group having opened a record 36 sites in its most recent financial year.
According to Fortress, the group’s directors expect to continue to open around 36 new sites per annum.
“We are more ambitious than ever, and we see Fortress as being an ideal partner to help us take Loungers into the next phase of its growth journey,” Reilley continued.
“We believe that the acquisition represents a compelling proposition for all of our stakeholders and will allow us to execute our ambitious growth plans even more decisively and effectively.”
