The Loungers bar and restaurant chain has been snapped up by a New York investment firm that already owns the Punch pub company, Majestic Wine and Curzon cinemas in a £338.3 million agreed deal.
The acquisition by Fortress Investment group means yet another UK publicly quoted company being taken into the far less transparent world of private equity.
Fortress bid vehicle CF Exedra is offering 310p a share in cash, a 30.3 per cent premium to last night’s closing price of 238p. The share price has never been higher than the offer price. There is also an alternative mix and match paper offer of unlisted securities.
The deal came as Loungers, which has around 270 locations under the Lounge, Cosy Club and Brightside brands, revealed half year sales up 19% at £178.3 million and pre-tax profits more than 50% higher at £5.9 million.
However it warned prices will “inevitably” have to go up because of a £9 million hit next year from higher NI bills and the national living wage increase.
Loungers chairman Alex Reilley said: “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.
“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.
“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. 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.”
Domnall Tait, Managing Director at Fortress said: “Fortress is pleased to present this offer for Loungers, a company we believe holds a strong and differentiated position in its industry. Loungers’ Directors have delivered impressive increases in the number of locations, same-store sales and revenues over the past several years - in spite of the recent challenges faced by the wider hospitality sector. This growth, and management’s continued commitment to the business, give us confidence in the company’s growth potential and in the opportunity to increase value.
“Fortress brings to the table a successful track record of investing in consumer-focused businesses across the globe, particularly in the UK. For example, Fortress’ investment in Majestic Wines and Punch Pubs & Co. has helped drive the growth of each of those companies. Today’s announcement further strengthens Fortress’ commitment to the UK market, and to being a responsible steward of and investor in UK businesses.”
Fortress said it believes that “the market value of a Loungers share has failed to adequately reflect Loungers’ positive business performance to date. With no indication this will change,
“Fortress believes the acquisition presents a solution to the performance and liquidity challenges of Loungers shares, giving Loungers shareholders a record exit price, and certainty...Fortress believes that moving to private ownership will be in the interests of Loungers, its customers and its other stakeholders”.
Loungers directors began to consider ways to realise value for shareholders in early 2024 and took on financial advisers to undertake a competitive private sale process. Fortress made a total of four proposals leading to today’s agreed deal.
Loungers said shareholder value “has for some time been negatively impacted by economic uncertainty and negative market sentiment towards the UK hospitality sector in general, as well as the significant challenges faced by the wider AIM market, and that these factors are likely to continue to exert a negative influence on Loungers shareholder value.”
The Loungers board also said lack of liquidity in its shares had been another factor in the decision to sell as “illiquidity can make it challenging to attract new investors or for larger Loungers Shareholders to monetise their holdings.”
