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Thu 24th Aug 2017 - Stonegate to buy Revolution Bars Group for £101.5m
Stonegate to buy Revolution Bars Group for £101.5m: Stonegate Pub Company has reached agreement with Revolution Bars Group to buy the company for £101.5m. Under the terms of the offer, Revolution shareholders shall be entitled to receive 203p per share in cash, representing a premium of approximately 62.40% to the closing price per Revolution share of 125 pence on 28 July 2017, which was the last business day prior to the commencement of the offer period. Revolution Bars Group stated: “The Revolution directors, who have been so advised by Numis as to the financial terms of the offer, consider the terms of the offer to be fair and reasonable. In providing advice to Revolution directors, Numis has taken into account the commercial assessments of the Revolution directors. In addition, the Revolution directors consider the terms of the offer to be in the best interests of Revolution shareholders as a whole. Accordingly, the Revolution directors intend to recommend unanimously that Revolution shareholders vote in favour of the scheme at the court meeting and the resolutions to be proposed at the general meeting as the Revolution directors have irrevocably undertaken to do in respect of their own beneficial holdings of 998,523 Revolution shares representing, in aggregate, approximately 2.% of the ordinary share capital of Revolution in issue on 23 August 2017. Stonegate has received support for the Offer from Revolution shareholders holding a total of 10,470,644 revolution shares representing, in aggregate, approximately 20.94% of Revolution’s ordinary share capital in issue on 23 August 2017. This support comprises an irrevocable undertaking to vote in favour of the scheme at the court meeting and the resolutions to be proposed at the general meeting from Castlefield Fund Partners in respect of a total of 2,085,000 Revolution shares representing, in aggregate, approximately 4.17% of Revolution’s issued ordinary share capital; a letter of intent from Artemis Investment Management LLP to vote in favour of the scheme at the court meeting and the resolutions to be proposed at the general meeting in respect of 7,387,121 Revolution shares, representing, in aggregate approximately 14.77% of Revolution’s issued ordinary share capital; and the irrevocable undertakings provided by the Revolution directors described above. The offer shall be put to Revolution shareholders at the court meeting and at the general meeting. In order to become effective, the scheme must be approved by a majority in number of the Revolution shareholders voting at the court meeting, either in person or by proxy, representing at least 75% in value of the Revolution shares voted. In addition, resolutions required to implement the scheme must be passed by the relevant requisite majority of Revolution shareholders at the general meeting. The scheme must also be sanctioned by the court.” Revolution Bars Group non-executive chairman Keith Edelman said: “We believe the offer from Stonegate represents an attractive and certain value in cash today for Revolution shareholders, reflecting the high quality of the business, its people, market position and future prospects. The Stonegate proposal provides considerable opportunities for our people and for the business as a whole. Stonegate is an experienced operator in this sector that understands Revolution’s ethos with its unique premium bar offering.” Stonegate chairman Ian Payne added: “We are delighted to announce this agreement with Revolution, which is a business we know well and whose leading position in the premium segment of the drinking out market is a highly complementary addition to our existing offering. Our strong reputation and position in the market firmly establishes Stonegate as the natural home for Revolution’s brands, and will allow us to enhance further the breadth of offer and occasions we cater for. This acquisition is entirely consistent with our stated strategy to capitalise on the town and city centre drink-led opportunity. Stonegate has a successful track record of investing in and growing the businesses, which it has acquired. Revolution is a high-quality business with good people and an attractive consumer proposition. We look forward to working together with our new colleagues joining the enlarged Stonegate group to continue to provide a great experience for customers.” Revolution Bars Group currently trades from 68 sites, 54 under the Revolution format and 14 under the Revolución de Cuba format. Stonegate operates more than 690 pubs split into two divisions – Branded (Slug and Lettuce, Yates’s, Walkabout, Common Room and Venues) and Traditional (Proper Pubs, Town Pub & Kitchen, and Classic Inns). It acquired Intertain from private equity firm Better Capital for about £39.5m in December last year.
 
Numis Securities – ‘We’re expecting to see early signs of recovery at The Restaurant Group’: Numis Securities leisure analyst Tim Barrett has said he expects to see early signs of recovery at The Restaurant Group when it unveils its first-half results next Thursday (31 August). Issuing a ‘Buy’ note on the shares with a target price of 430p, Barrett said: “The Restaurant Group last updated the market for weeks one to 20, when like-for-likes were -1.8%, a material improvement from the fourth quarter of 2016 run rate of -5.9% and ahead of market expectations. The Restaurant Group has a degree of correlation with cinema attendance (circa 50% of sites are co-located) and a weak film slate and record June weather were unfavourable (-10% in May and June compared to +13% for the first four months). It therefore seems reasonable to expect a small, temporary moderation in footfall from week 20 and our first-half forecasts are based on -2.5% for like-for-like sales in the first half as a whole. Helpfully, The Restaurant Group enjoys a degree of offset from its pub business, which will have been helped by the weather. After a 190 basis point Ebit margin decline in FY16, we expect a further fall of 200 basis points in FY17 before margins reach a turning point at the end of the year. Drivers include the impact of the National Living Wage (£4-5m), business rates (£5m) and cost of goods sold inflation (£5m to £7m), as well as the operational gearing impact from lower like-for-like sales (-£19m). This should be offset by £10m from exiting unprofitable sites and £5m from openings. Management’s turnaround plan addresses legacy issues well in our view. The group is also targeting £10m of overhead savings (by 2019) to reinvest in price, product and marketing. Our estimates suggest the stronger than expected trading over the first 20 weeks, could fund an additional £4m to reinvest in such marketing initiatives. The first half of 2017 is a 26-week period in contrast to 27 weeks in the first half of 2016; the extra week added £19m in sales and £3m in Ebit. We forecast Ebit of £26.3m (versus £37.5m), profit before tax of £25.4m (£36.6m) and earnings per share of 9.9p (14.1p). Investors are well aware FY17 is a transitional year: the new chief executive only unveiled his strategic findings in March and menu roll-outs were only completed at the start of May (with lower prices likely to dampen like-for-like sales in the short term). We therefore expect the market to focus on the customer response to new menus, the cost savings plan and progress in exiting closed properties. We forecast an unchanged interim dividend of 6.8p (1.3 times FY cover, 5% yield). The Restaurant Group stands out as a business with clear self-help potential in a sub-sector with multiple cost pressures and lacklustre like-for-like sales. The new management team has a credible plan to correct previous mistakes and recover margins. Equally, it is a strong cash generator with an unusually robust balance sheet for a turnaround situation (net debt/Ebitda 0.3 times). The freehold-backed pub business and high growth concessions sites underpin 160p/share of value in our view, leaving the remaining leisure operation on a 4.5 times multiple of Ebitda. We retain a ‘Buy’ recommendation.”
 
US competition watchdog clears Amazon’s £10.7m takeover of Whole Foods Market: The US Federal Trade Commission has said it will not stand in the way of Amazon’s planned $13.7bn (£10.7bn) takeover of Whole Foods Market, signing off on the deal hours after it was backed by shareholders. The regulator checked to see if the deal could seriously hamper competition in the market but has decided not to investigate further, its acting competition chief Bruce Hoffman said. Shareholders in Whole Foods had given the acquisition their seal of approval hours earlier. This is set to be the biggest deal in Amazon’s history and will see the company take charge of more than 460 shops across the US, Canada and the UK. Amazon has had its eye on the food industry for years, having launched Amazon Fresh in the US a decade ago and in the UK last year, while Whole Foods has been under pressure to sell itself amid stalling growth. Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world. John Mackey will remain as chief executive of the company and its headquarters will stay in Austin, Texas. Whole Foods Market, which has nine sites in the UK, reported its second consecutive year of profit in the UK last year. The company lost money for eight consecutive years in the UK but turned to profit in its 2015 financial year. Companies House accounts for the year to 25 September 2016 show turnover up 3% on a like-for-like basis to £117.2m, from £114m the year before. Pre-tax profit was £1,206,000, down slightly from £1,312,000 the year before. Administrative expense improved by eight basis points to 40.5%, with a drop of 39 in the total number of staff during the year. In total, Whole Foods Market has 430 stores in the US, Canada and UK.

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