Bar group Revolution has told its shareholders that a proposed merger with Deltic is not in their best interest and recommended they vote in favour of a rival offer from Stonegate in the absence of a firm cash offer.
The response comes after Deltic and its holding company Ranimul proposes, in a revised offer, that Revolution shareholders would own 65% and Ranimul shareholders 35% of the enlarged group, which would be run by the Deltic management team, including Bob Brannan, Peter Marks and Alex Millington, current Deltic chairman, chief executive and group finance director, respectively.
Revolution said it was concerned about the lack of guarantee that the enlarged group could deliver on financial targets and that the enlarged group would have a large debt burden.
The company initially rejected Deltic's advances outright and agreed a £100m takeover offer from Stonegate in August, however Revolution has since entered into talks with Deltic. Revolution's shareholders are expected to vote on Stonegate's offer on 17 October, which Deltic asserted "significantly undervalued" the business.
Stonegate has offered 203p per share, whereas Deltic's merger offer values Revolution at 314p per share. Revolution's largest shareholder, Artemis, is reported to have withdrawn its support for Stonegate's offer, despite Revolution's reservations about the Deltic offer.
Meanwhile, Deltic has until tomorrow to announce a firm intention to make an offer for Revolution or announce that it does not intend to make an offer.
Non-executive director of Revolution Keith Edelman said: "The board does not believe the pursuit of a merger with Deltic is in the best interests of the company or its shareholders and, in the absence of a firm cash offer from Deltic, maintains its unanimous recommendation that shareholders should vote in favour of Stonegate's offer at the revolution shareholder meetings on 17 October 2017."
In a response this afternoon, Bob Brannan, Deltic's chairman, said: "Deltic is incredulous that Keith Edelman, the only board member of Revolution who has had any contact with Deltic in respect of the merger proposals, and its advisers can, given feedback from Revolution's shareholders, continue to recommend Stonegate's offer at a price below both the current Revolution share price and all broker estimates whilst refusing to have any meaningful engagement with Deltic and demonstrating a limited understanding of the nightclub market. If Deltic succeeds in implementing its Revised Merger Proposal, it will adopt a very different approach to the stewardship of shareholders' capital."
Deltic "strongly" urged Revolution shareholders to vote against the Stonegate offer and to encourage Revolution's board to progress Deltic's offer to allow it to be formally presented to, and voted on, by Revolution shareholders.
Deltic has 65 bars and nightclubs across the UK and was formed out of Luminar, which went into administration in 2011.
Stonegate has 690 pubs and restaurants under brands including Yates, Walkabout, and Slug and Lettuce.
Revolution has more than 60 bars.
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