Thu 30th Jan 2025 - Loungers shareholders back £354.4m takeover deal Loungers shareholders back £354.4m takeover deal: Shareholders of café bar operator Loungers have backed its £354.4m takeover by US private equity firm Fortress. A total of 93.52% of shareholders voted in favour of the deal. A court sanction hearing is expected to take place on 7 February with the last day of trading in Loungers shares being 10 February, having been admitted to the AIM market in 2019. Fortress, which backs Punch Pubs, first announced at the end of November that it had agreed a deal to take the 285-strong café bar operator private in a £350.5m deal. The cash offer of 310p per share valued 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. Shares in Loungers surged 28% in trading to close at 304p on the day of the announcement. The company said it had begun to consider ways to optimise value for its shareholders in early 2024 and 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, and as part of this sale process, Fortress submitted an initial proposal that the Loungers directors determined was not at a level they considered recommendable. During an extensive period of negotiations, Fortress then made a further three proposals, culminating in the 310p-per-share offer. While the group’s directors recommended that shareholders vote in favour of the deal, the day after the announcement, two of the company’s biggest shareholders rebelled against the proposed takeover. Mark Slater, whose firm Slater Investments owns a 10.4% stake in Loungers, said that he would reject the takeover, while Dan Harlow, head of UK Equity at AXA Investment Managers, said he also intends to vote against the deal. However, Canaccord Genuity Asset Management, which holds a 1.7% share in Loungers, said it would vote in favour of the acquisition. In the following days, more opposition surfaced as Gresham House, which has an 3.9% stake in the AIM-listed café-bar group, said it would vote against the takeover, while fund manager Downing, which has a 1.5% stake in Loungers, said it was “absolutely furious” about the proposed deal. Earlier this month, Fortress increased its offer to 325p a share, valuing the business at £354.4m. The “increased and final cash offer” implied an enterprise value of approximately £366.6m and a multiple of approximately 8.4 times Loungers’ FY24 adjusted Ebitda (before site pre-opening costs) and of approximately 9.4 times Loungers’ FY24 adjusted Ebitda (after site pre-opening costs). It also represented a premium of approximately 4.8% to 310p per Loungers share, being the original cash offer for the acquisition and a premium of approximately: 36.6% to the closing price of 238p per Loungers share on 27 November 2024, being the last business day before the original announcement date. Despite this, Judith MacKenzie, head of Downing Fund Managers, said Fortress was just “paying lip service” to improving the bid and called it “a paltry offer”. Loungers, which trades under the Lounge, Cosy Club and Brightside brands, was founded in 2002 by three friends – Alex Reilley, his school friend Jake Bishop and Dave Reid, a restaurateur – opening their first Lounge in 2002 in Bristol. The company now operates 285 sites, having opened 35 new locations in 2024 and started 2025 by opening Blanco Lounge in Bolton, Toledo Lounge at the Merry Hill shopping centre in the West Midlands and Calvero Lounge in Tenterden, Kent. Next month, the group will open the Argento Lounge in Preston; the Manzano Lounge in a Rayleigh, Essex; and the Saludo Lounge in Workington, Cumbria. Loungers also has Lounge openings lined up in Ipswich (Marinero Lounge) and Norwich (Rivolo Lounge) for later this year. Loungers features in the Propel 500 report, an unparalleled resource that profiles the UK’s leading hospitality operators ranked by turnover – which is available now. This comprehensive report provides more than 90,000 words of analysis, delving into company histories, leadership structures, site numbers and financial performance, making it an essential resource for industry professionals. A list of the operators included can be discovered now by visiting the Propel 500 page on Propel’s website. The guide is delivered in two parts: an introductory PDF, featuring deep dives into the top 25 companies and 6,500 words of insight from Propel’s expert writers, and a fully searchable Excel sheet, offering easy access to all the data. Key highlights include Mark Wingett’s exploration of mergers and acquisitions shaping the Top 500’s future, Tim Street’s view of the UK’s franchise market, and Phil Pemberton’s insights into experiential leisure as a hospitality cornerstone. Katherine Doggrell examines developments in UK hotels, while Mark Bentley, business development director at HDI, identifies emerging growth sectors, and Maria Vanifatova, founder of Meaningful Vision, analyses trends in QSRs. Propel 500 is available now for £595 plus VAT. Existing Premium Club members can purchase it for £395 plus VAT. Premium Club members will receive the report for free on Friday, 28 February at 9am. Order the Propel 500 report today by emailing: kai.kirkman@propelinfo.com.