Deltic makes fresh bid for Revolution Bars
Nightclub operator Deltic has laid out its plans for a merger with Revolution Bars after its previous proposal was rejected and despite the company having already agreed a deal with Slug and Lettuce owner Stonegate.
REVOLUTION BARS
£0.02
17:35 23/04/24
Under the terms of the deal, Revolution shareholders would own 65% of the new company, with Deltic owning the rest, and the merged entity would be run by the current Deltic management team.
Deltic said the enlarged group should benefit from around £6.8m of currently identified pre-tax cost synergies and around £0.9m of pre-tax financing synergies. In addition, the group is expected to be "highly cash generative" and financed conservatively, with gearing no higher than 1.5x adjusted EBITDA.
Deltic said it had been "disappointed by Revolution's level of engagement" since the first approach and its complete rejection of its formal merger proposal.
"The combination of Revolution and Deltic would create a strong business of significant scale and expertise in the UK's late night market, with both entities exhibiting a similar modus operandi.
"The town centre market remains fragmented and a combination of Deltic with Revolution will be well placed to penetrate their local markets alongside other operators of scale such as Wetherspoons, Stonegate and Mitchells & Butler."
Deltic said it plans to share its new proposals directly with Revolution shareholders, "as it is they who ultimately need to determine the future of Revolution rather than its directors".
"In order to enable Revolution to form its own opinion on the merger proposal, Deltic has also now granted due diligence access on its business to Revolution."
Canaccord Genuity said that while investors may be drawn to the certainty of Stonegate's 203p a share cash offer, Deltic's all-share merger proposal deserves serious consideration.
"Shareholders might double their investment in the Deltic scenario by FY19E. If the new vehicle underperforms, the fall-back is that Stonegate could reappear. We recommend the Deltic proposal," it said.
At 1050 BST, the shares were down 2.1% to 206p.