Fortress Investment Group (Fortress) and Loungers plc announce the recommended acquisition of Loungers plc by Fortress. Under the terms of the Acquisition, each Loungers plc Shareholder will be entitled to receive 310 pence in cash for each Loungers plc Share, with an alternative option to participate in an unlisted share alternative in respect of some or all of their Loungers plc Shares.
Acquisition highlights
• The Cash Offer price is above the highest-ever closing price for Loungers Shares, and is a 30.3 per cent. premium to the Closing Price of a Loungers Share of 238 pence on 27 November 2024 (being the last Business Day prior to this announcement).
• The Cash Offer was the result of a competitive private sale process. The Cash Offer price of 310 pence per Loungers Share was secured after extensive negotiations and is the highest offer level to be proposed during the sale process.
• Bidco has procured irrevocable commitments to vote in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or if the Acquisition is implemented by an Offer, to accept or procure acceptance of such Offer) in respect of 41,774,202 Loungers Shares representing approximately 40.2 per cent. of the existing issued ordinary share capital of Loungers as at 27 November 2024 (being the last Business Day prior to this announcement).
• Fortress’ private capital investment approach is to acquire companies with strong management teams, and to empower them to deliver their long-term strategy with the goal of increasing value. Fortress has industry knowledge; a strong belief in the future of experience-led retail; and a successful track record of growing businesses. In the pubs and hospitality space, Fortress has successfully invested in and supported the growth of Punch Pubs & Co., Majestic Wines and Vagabond in the UK.
• Fortress is excited to partner with Loungers management through Loungers’ next stage of growth. Fortress holds Loungers’ management team in high regard and admires its remarkable progress to date and recognises that Loungers’ employees have played a critical role in its achievements to date and will remain a key part of its future success as a private business.
• Fortress 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.
• The Loungers Directors, who have been so advised by Houlihan Lokey as to the financial terms of the Cash Offer, consider the terms of the Cash Offer to be fair and reasonable. In providing its advice to the Loungers Directors, Houlihan Lokey has taken into account the commercial assessments of the Loungers Directors. Houlihan Lokey is providing independent financial advice to the Loungers Directors for the purposes of Rule 3 of the Takeover Code. Accordingly, the Loungers Directors intend unanimously to recommend that Loungers Shareholders vote in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting.
Commenting on the Acquisition, Alex Reilley, the Chairman of Loungers, 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.”
Commenting on the Acquisition, 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 has a high conviction in the future of experience-led retail and hospitality, and believes this is highly complementary to Loungers’ business model, strong operational performance, and impressive management team. Fortress looks forward to partnering with Loungers’ management and to providing them with support to drive the business through its next stage of growth.”
Loungers operates café bars, café restaurants, and roadside dining across the United Kingdom through three complementary brands: Lounge, Cosy Club and Brightside. They have strong track record of growth and profitability, driven by an ambitious roll-out strategy and like-for-like sales growth. During FY24, Loungers opened a record 36 sites. The Loungers Directors expect to continue to open around 36 new sites per annum.
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