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Abu Dhabi-backed Fortress Investment Group has agreed to buy pub and restaurant chain Loungers for £351mn, marking its latest push into the UK consumer sector.
Fortress’s UK portfolio already includes Majestic Wine, Poundstretcher and Punch Pubs. The group recently seized control of the British cinema chain Curzon for $5mn at an auction this month.
The private equity group, which has about $48bn in assets under management and is majority-owned by Abu Dhabi’s Mubadala investment arm, said it would pay 310p per share for Loungers, a 30 per cent premium to Wednesday’s closing price. The deal gives Loungers an enterprise value of £350.5mn.
Shares in Loungers surged 30 per cent in morning trading following the announcement, to 308p.
The target company was founded as a single site in Bristol in 2002, and now has 280 sites under its Lounge, Cosy Club and Brightside brands. It listed on Aim in 2019 and plans to expand to 292 sites by the end of its current financial year.
Domnall Tait, managing director at Fortress, said Loungers had delivered “impressive increases in the number of locations, same-store sales and revenues” in recent years “in spite of the recent challenges faced by the wider hospitality sector.”
Loungers joined other UK hospitality businesses on Thursday in warning that it would have to put up prices, thanks to measures introduced in the Budget. It said a rise in employers’ national insurance contributions and increase to the national living wage would cost it £9mn to implement next year.
The group said that increase would “inevitably lead to us having to put up our prices — albeit, as ever, in a disciplined, managed way”.
This month, more than 200 hospitality heads warned the chancellor that her measures would lead to “drastic” job cuts and business closures, saying the rises disproportionally affect the hospitality industry.
Loungers’ co-founder and chair Alex Reilley said on Thursday the Fortress deal would “allow us to execute our ambitious growth plans even more decisively and effectively”, adding: “The half-year results that we announced separately today clearly demonstrate the strong momentum that we have in the business.”
The company reported a 51 per cent jump in pre-tax profits for the six months to early October, to almost £6mn, on a 19 per cent jump in revenue to £178mn.
Fortress said the acquisition presented “a solution to the performance and liquidity challenges of Loungers shares”.