Loungers takeover faces more opposition

Opposition to a planned takeover of Loungers is gathering pace as more shareholders said they intended to reject the deal.
Gresham House, which has an 3.9 per cent stake in the Aim-listed café-bar group, according to FactSet, said it would vote against Fortress Investment Group’s 310p-a-share offer for Loungers, which values the company at about £338 million, saying the bid “looks opportunistic and substantially undervalues the long-term prospects of the business”.
Ken Wotton, managing director of public equity at Gresham House, said the deal “is not in the interests of shareholders, particularly those unable to take up the opportunity of rolling into the private vehicle”.
Gresham is the third shareholder to say it will reject the deal. Mark Slater, whose company Slater Investments owns a 10.4 per cent stake in Loungers, has said he plans to reject the takeover, arguing that “it’s the wrong time to be trying to sell a very good business of this kind”.
AXA Investment Managers also intends to reject the deal, saying that the management’s frustration with the group’s share price “is no excuse to throw the towel in at what we consider could be the darkest hour”.
However, Canaccord Genuity Asset Management, which has a 1.7 per cent stake in the Aim-listed café-bar group, said it would vote favour the deal. With this shareholder’s approval, it means that now almost 42 per cent of voting shareholders have signalled approval of the deal. The group’s directors have recommended that shareholders vote in favour of the deal.
A spokesman for Loungers said on Friday: “This offer values Loungers’ shares at an all-time high, provides its shareholders with the opportunity to receive an immediate and certain valuation, and comes after a competitive process.
“Loungers’ strong and consistent growth has not been reflected in its market valuation, and the illiquidity in its shares has meant that it can be challenging to attract new investors, and for existing shareholders to monetise their holdings. As such, the board believes that the acquisition represents a compelling proposition for Loungers’ shareholders.”
Shares in Loungers, which trades under the Lounge, Cosy Club and Brightside brands, floated on London’s junior stock market in April 2019 at 200p a share. The shares closed at 238p on Wednesday, before jumping 28 per cent to a record 305p on Thursday when the deal was made public. They closed flat at 304p on Friday.
Fortress believes that taking Loungers private will address “the performance and liquidity challenges of the group’s share price, which has failed to adequately reflect Loungers’ positive business performance to date”.
Founded in 2002 by three friends — Alex Reilley, Jake Bishop and Dave Reid — the business opened its first Lounge that year in Bristol. It now operates 280 sites and is on track to finish the present financial year with 292.
Reilley, the chairman, who has a 6.7 per cent stake in the company, and Bishop, with a 6.3 per cent stake, are keeping the majority of their money in the business.
Reilley said he saw Fortress “as being an ideal partner” to help propel Loungers “into the next phase of its growth journey” and believed the deal was a “compelling proposition for all our stakeholders”.