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Highlights:
- Fortress Takeover Offer: Loungers PLC has received a 310p-per-share cash offer from US private equity firm Fortress, valuing the company at £338 million.
- Key Shareholder Backing: Canaccord Genuity Asset Management, a significant shareholder, has pledged its support, bringing approval to approximately 42% of voting shareholders.
- Market Valuation Critique: Loungers' move to sell reflects concerns over undervaluation by the UK market despite robust operational performance.
Loungers PLC (LSE:LGRS), the UK hospitality group behind popular casual dining brands, has made strides towards finalizing a 310p-per-share takeover deal with US private equity firm Fortress. The cash offer, valuing the company at £338 million, includes a 30% premium over its pre-announcement share price, underscoring a significant milestone in Loungers' market journey.
Shareholder Approval Reaches Key Milestone
Canaccord Genuity Asset Management, one of Loungers’ major shareholders, has declared its intention to vote in favor of the deal. With this endorsement, approximately 42% of voting shareholders have now signaled their approval. The backing from Canaccord serves as a pivotal endorsement of Fortress’ bid and moves Loungers closer to securing the required shareholder majority.
Loungers’ Struggles with Market Valuation
Since its flotation on the AIM market in 2019, Loungers has demonstrated strong operational growth but has struggled to resonate with market valuation expectations. Despite its steady progress, the hospitality group faced challenges in aligning its intrinsic value with market perceptions. The decision to explore a private equity sale earlier this year reflected Loungers' frustration with being undervalued by public markets.
Dan Coatsworth, an investment analyst at AJ Bell, highlighted this trend: “So many UK-listed companies are being taken over because the market didn’t spot the value on offer. Loungers’ decision to pursue a sale underscores this ongoing issue, providing shareholders with an alternative pathway to realize value.”
The Fortress Offer and Market Impact
Fortress’ acquisition proposal comes with a significant premium, offering shareholders a compelling exit strategy amidst ongoing market challenges. The 310p-per-share offer has been well received, with Loungers' shares trading close to the offer price at 305p. The transaction reflects broader trends in the UK market, where undervalued companies have increasingly attracted private equity interest.
Looking Ahead
With Fortress’ offer gaining momentum, Loungers is poised for a transformative period under new ownership. The deal highlights the growing role of private equity in reshaping undervalued UK businesses while raising questions about market dynamics and the challenges faced by smaller publicly listed companies. For Loungers, the takeover marks the culmination of years of operational success but also a recognition of the limitations of public market valuation.
