(Alliance News) - Loungers PLC said on Thursday it has agreed to the terms and conditions of a roughly GBP340 million all-cash takeover by Fortress Investment Group, alongside reporting strong half-year results that underline the cafe and bar operator's "steady growth and market resilience".
Loungers led the FTSE AIM 100 Index on Thursday morning, with shares soaring 28% to 304.60 pence each following the announcement, giving the company a market capitalisation of GBP309.6 million.
Loungers, based in Bristol, England, operates the Lounge, Cosy Club, and Brightside brands across 258 nationwide.
Fortress, an American investment management firm based in New York City with approximately USD48 billion in assets under management, has offered 310 pence per share in cash, representing a 30% premium to Loungers' closing price of 238 pence on Wednesday. The deal values Loungers' equity at GBP338.3 million and gives the business an enterprise value, including debt, of GBP350.5 million.
The Loungers board has unanimously recommended the deal, with over 40% of shareholders already pledging their support through irrevocable undertakings secured by CF Exedra Bidco Ltd, a newly formed entity indirectly owned by Fortress Investment Group to oversee the acquisition.
Fortress said its strategy is to acquire businesses with strong management teams and support their long-term growth. It believes Loungers' market valuation has not reflected its "positive business performance" and sees the acquisition as a way to address liquidity challenges while providing shareholders with a record-high exit price.
The takeover is expected to be completed in the first quarter of 2025.
The acquisition, subject to shareholder and regulatory approvals, will be executed via a court-sanctioned scheme of arrangement. Shareholders also have the option to receive unlisted securities in the newly formed holding company, CF Exedra Topco Ltd, as an alternative to the cash offer.
Chair Alex Reilley said: "Loungers has come a long way since we opened our first site in Bristol in 2002. 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."
Fortress' Managing Director Domnall Tait 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."
Separately, Loungers released its half-year results for the 24 weeks to October 6, showcasing strong financial performance.
Pretax profit surged 51% year-on-year to GBP6.0 million from GBP3.9 million, as revenue climbed 19% to GBP178.3 million from GBP149.6 million.
The company said trading continued to go well into the third quarter, with like-for-like sales growing 3.9% over the seven weeks to November 24 despite disruptions caused by Storm Bert.
Loungers opened 17 new sites in the period and remains on track to open 35 new sites for the full year, bringing its total estate to 292 locations.
Chief Executive Officer Nick Collins said: "The first half of the year has been another period of excellent progress for Loungers. As ever, the performance is testament to the quality and flexibility of our all-day offering, the hard work and professionalism of our teams, and the ongoing resilience of the UK consumer."
By Eva Castanedo, Alliance News reporter
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