War of words in Revolution ownership saga

The chairman Britain’s biggest nightclub operator Deltic Group has launched a scathing attack on the board of Revolution Bars Group with whom it is seeking a merger – and stepped up pressure on its shareholders.

Deltic, which has a 57-club estate, says it has had “positive feedback” from a “significant number of Revolution shareholders” over an “alternative merger proposal” which would mean the operator of the Revolution and Revolución de Cuba brands would ditch a seemingly already-agreed £101.5m deal which would see it acquired by pub company Stonegate.

The proposed merger offer – made without the consent of the Ashton-under-Lyne, Greater Manchester-headquartered Revolution board – would see existing Revolution shareholders own 65% of the enlarged group, with Ranimul (Deltic’s holding company) shareholders holding the remaining 35%.

Yesterday (Monday, October 9), Revolution continued to reject the Deltic proposal in a response announcement.

In a statement released on the Stock Market early yesterday evening Deltic said the terms of its merger offer may now change unfavourably ahead of the 5pm deadline today (Tuesday, October 10) by which time it will either announce a firm intention to make an offer for Revolution or abandon the process.

It said: “Based on the fact that Revolution has since (Friday) October 6 raised negligible enquiries on the due diligence information provided to it, Deltic can only assume that Revolution has conducted highly limited analysis on Deltic and, by its comments in the Revolution response announcement, has demonstrated that it has not sought to gain any genuine understanding of Deltic or its business model.

“Furthermore, Revolution has not conducted any meetings with Deltic’s wider management team. Rather, Deltic believes the Revolution board has sought to apply its pre-conceptions and prejudices in re-confirming the position it has held since Deltic made its first approach.

“To put this in context, Revolution’s chief executive has not had a single conversation, meeting or any other form of communication with either Deltic or its advisers in respect of the merger proposals.”

It went on: “Against such a backdrop of hostility, negativity and ill-informed commentary, Deltic does not intend to comment individually on each of the points made by Revolution in the Revolution response announcement.

“Instead, given its very clear value proposition, it would instead invite Revolution shareholders to question why Revolution’s board has failed to engage meaningfully in any alternative to Stonegate’s offer of 203 pence per share.”

Deltic also referred to the Stonegate announcement of October 6 in which the pub company asserted the certainty of its offer compared to the merger proposal.

The nightclub owner said the revised merger proposal is not a high-risk proposition, claiming the Ranimul profit forecast, the Ranimul long term gorecasts and the quantifiable financial benefits statement have been made with due care and attention and Deltic’s projected post-merger gearing is highly conservative and contrasts significantly with Stonegate’s wholly debt funded offer.

Deltic said its offer is straightforward to execute if Revolution is prepared to engage.

“Deltic believes Revolution shareholders are perfectly capable of reaching their own determination as to where value lies,” it said.

Commenting on the Revolution response announcement, Bob Brannan, Deltic’s chairman, said: “Deltic is incredulous that Keith Edelman,(non-executive chairman of Revolution), 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.”

In a response to the Deltic comments, Revolution countered this morning (Tuesday, October 10) by releasing the statement: “The board maintains and reiterates that it does not believe that the revised merger proposal would create shareholder value for Revolution’s existing shareholders in excess of the certain and immediate value represented by the recommended 203p cash offer from Stonegate Pub Group.”

It goes on: “Save for the addition of a possible alternative proposal involving the Ranimul Loan, the Board notes that the revised merger proposal is the same as the original merger proposal set out by Deltic in its announcement of a merger proposal and its subsequent merger proposal clarification released on October 5, 2017.

“The board does not consider that the addition of this possible alternative has a material impact on its repeatedly stated concerns over both the value and deliverability of a proposed combination of Revolution and Deltic.

“The board urges Revolution shareholders to read in full its response of yesterday, which sets out its detailed concerns on both the value and deliverability of this non-binding merger proposal.”