Revolution Bars rejects Nightcap takeover proposal

The AIM-listed bar operator announced earlier this month that it had held "an exploratory meeting" with Piano Works owner Nightcap about a range of possible transactions, including a potential takeover.

Since then, Revolution has had several meetings and phone calls with Nightcap to discuss its interest in making an offer for the company.

On 17 May, Revolution received a non-binding proposal from Nightcap. This proposal would still require Revolution to proceed with the restructuring plan, but not the existing fundraising of £12.5m.

"However, following legal advice, the board has concluded that the Nightcap proposal is incapable of being delivered, which was communicated to Nightcap last week," it said.

"There were a number of challenges to the delivery of the Nightcap proposal, which was a highly conditional proposal and which was subject to multiple equity fundraisings by Nightcap, assumptions regarding the support of the company's and Nightcap's respective lenders, material due diligence, as well as significant time, material cost and potential untested legal and procedural issues."

Among the challenges, Revolution pointed to the fact the Nightcap proposal would require two separate equity fundraisings to successfully complete.

"The board notes that, should the restructuring plan proceed and be sanctioned by the Court, it would preserve value for the company's current shareholders by comparison to the offers received from the M&A process which provided no equity value, whilst acknowledging the dilutive effect of the fundraising for those shareholders who have not participated in its pro rata to their current shareholdings," it said.

At 0915 BST, the shares were down 6.3% at 1.40p.

Dan Coatsworth, investment analyst at AJ Bell, said: "Revolution Bars appeared to confirm suspicions that combining with Nightcap would just double the problems facing the two troubled night spot operators. It is striking to see a company say a bid is ‘incapable of being delivered’ and Revolution Bars continues to push shareholders to stick with its own restructuring plan.

"The bigger issues, throbbing away in the background like an insistent beat, are the rising costs and waning demand faced by this end of the hospitality sector. Fewer younger people are in the habit of going out drinking on a regular basis, meaning late-night operators need to come up with new ways to keep people frequenting their outlets."