Punch-backer Fortress to take Loungers private in £350.5m deal: Private equity firm Fortress, which backs Punch Pubs, has agreed a deal to take the 280-strong café bar operator Loungers private, in a £350.5m deal. The cash offer of 310p per share values the entire issued, and to be issued, ordinary share capital of Loungers at approximately £338.3m, and at an enterprise value of approximately £350.5m. The offer represents a premium of approximately 30.3% to the closing price of 238p per Loungers share on 27 November 2024. Alex Reilley, 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.” 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.” Fortress said: “Fortress recognises that Loungers’ portfolio of complementary brands resonate strongly with the UK consumer, and that this experience-led approach has helped Loungers grow from one brand and one site in 2002 to three brands and 280 sites as at 27 November 2024. Alongside this expanded store count, Fortress is impressed by Loungers’ track record in delivering strong like-for-like sales performance and return on capital, and admires the achievements of the current leadership team of Reilley and Nick Collins and wider employee base. Fortress notes the strong financial performance of Loungers since IPO, with sales increasing from £153m in FY19 to £346.6m in FY24, in what has been a challenging environment for UK hospitality due to disruptions caused by covid, rising inflation and the cost of living crisis, as well as the wider impact of geopolitical events on consumer sentiment.” Loungers said it began to consider ways to optimise value for its shareholders in early 2024. It engaged financial advisers to assist in an assessment of whether a significant increase in value could be obtained for shareholders. A competitive private sale process was undertaken during which Loungers said it entered into discussions with a number of potential strategic and private equity acquirers. As part of this sale process, Fortress submitted an initial proposal which the Loungers directors determined was not at a level they considered recommendable. During an extensive period of negotiations, Fortress made a further three proposals, culminating in the cash offer at 310 pence per Loungers share. Houlihan Lokey advised Loungers.