- Nightcap proposal rejected
- Existing fundraising and restructuring plan preferred
- Revolution open to further offers after recapitalisation
Embattled premium nightclub operator Revolution Bars (RBG:AIM) has rejected a proposal from Nightcap (NGHT:AIM) so it can proceed with its existing £12.5 million fundraising and restructuring plans.
The board said diverting from its intended course to deliver the associated cost savings would result in liquidity pressures from the financial first quarter (July to September 2024) onwards.
Moreover, if the existing fundraising is not approved by shareholders the restructuring plan will not be capable of proceeding and absent any material financial support, the board considers the alternative sale process is likely to result in no financial return to shareholders.
In other words, Revolution Bars’ board believes the existing plan is in the best interests of shareholders.
The shares sank a further 6% to 1.4p taking losses over the last year to 80%.
WHY DID THE BOARD REJECT NIGHTCAP’S PROPOSAL?
Without going into the specifics of Nightcap’s proposal, the board identified several challenges including the requirement of two separate equity fundraisings by Nightcap compared with the secured fund raising on the table which only requires shareholder approval.
The board said the non-binding and ‘highly conditional’ proposal from Nightcap also required the support of its lenders, material due diligence as well as ‘significant time, material cost and potential untested legal and procedural issues’.
Adding to the complications, an acquisition by Nightcap would be constituted as a reverse takeover under AIM rules which would require extensive due diligence and the publication of an admission document which would then need approval from its shareholders.
Revolution Bars said it remains open to any future proposal from Nightcap or any other party following the completion of the restructuring plan when the company will have been recapitalised.
THE EXPERT’S VIEW
Dan Coatsworth, investment analyst at AJ Bell, commented: ‘Revolution Bars appeared to confirm suspicions that combining with Nightcap would just double the problems facing the two troubled night spot operators. It is striking to see a company say a bid is ‘incapable of being delivered’ and Revolution Bars continues to push shareholders to stick with its own restructuring plan.
‘The bigger issues, throbbing away in the background like an insistent beat, are the rising costs and waning demand faced by this end of the hospitality sector.
‘Fewer younger people are in the habit of going out drinking on a regular basis, meaning late-night operators need to come up with new ways to keep people frequenting their outlets.’
Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
