- Company agrees takeover by Fortress
- All-cash 310p offer is 30% premium
- Stock trades at new all-time high
All-day bar/restaurant operator Loungers (LGRS:AIM) came to the market on the eve of the pandemic in 2019 and now appears to be going back to private equity ownership after agreeing a takeover offer from Fortress Investment at a 30% premium to the last closing price.
The shares jumped 28% to a record high of 310p, giving those investors who bought at the IPO (initial public offering) price of 200p a 55% return. That pales into insignificance against the performance of the business which is 2.6 times bigger in revenue terms today than in 2019.
Post-pandemic, the company has served up consistent industry-leading like-for-like sales growth demonstrating the growing success of its unique all-day offering.
This was further demonstrated in today’s half-year results with the company growing revenue by 19.2%, reflecting 4.7% like-for-like growth and the addition of 35 net new sites.
The recommended cash offer of 310p per share therefore represents another blow to public markets and sees a quality growth stock and strong management team move back into private ownership.
WHAT DID THE COMPANY SAY?
Chairman Alex Riley commented: ‘We remain very confident about Loungers' future prospects and the half-year results we announced separately today clearly demonstrate the strong momentum 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 the acquisition represents a compelling proposition for all our stakeholders and will allow us to execute our ambitious growth plans even more decisively and effectively.’
The company said the sale was the result of a competitive private sale progress. Fortress said it believed the market has failed to fully reflect Loungers’ business performance, and the acquisition addresses that as well as the liquidity ‘challenges’ in the shares.
EXPERT VIEW
Investment analyst Dan Coatsworth at AJ Bell commented: ‘Takeover activity is red hot on the UK market, with action being recorded at the middle and lower ends of the market cap spectrum.
‘Among small-caps, hospitality group Loungers is being gobbled up. It was only a matter of time before Loungers was taken over as it never seemed to click with the market despite showing considerable progress since floating in 2019.
‘So many UK-listed companies are being taken over because the market didn’t spot the value on offer. Interestingly, it turns out that Loungers put itself up for sale earlier this year because it acknowledged the market wasn’t attributing fair value, so selling to a third party was an alternative way of generating an uplift for shareholders.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (Ian Conway) own shares in AJ Bell.
