Revolution Bars bidder disappointed but says more deals in bar sector inevitable

Bar operator Nightcap has disputed claims by rival Revolution Bars that its offer to buy the troubled Manchester-based hospitality group was “incapable of being delivered”.

The acquisitive London-based bar operator has withdrawn its offer but warned that more mergers in the sector are inevitable and that their proposal to merge the two hospitality businesses was a better offer than Revolution’s “highly dilutive £12.5m fundraising”.

In a statement to the stock market this morning, Nightcap, which owns 46 bars, mainly in London, but also Dirty Martini in Manchester and Tonight Josephine in Liverpool, said that with five acquisitions in just over three years it is “very well placed to continue executing on its consolidation strategy”. 

It said: “Opportunities for further consolidation in the late night sector will continue to arise in the coming year as the sector moves from incremental M&A activity to a fundamental structural transformation as many of the operators in the sector are going through significant change.”

On Tuesday Revolution dismissed Nightcap’s plan as “highly conditional” and said that as the proposal was subject to multiple equity fundraisings by Nightcap, it would take too long.

Instead Revolution said it was pursuing a twin track rescue and restructuring deal with £3m of backing from entrepreneur Luke Johnson, £3m from the Robus Recovery Fund II and £3.5 million from three key existing shareholders.

But the Nightcap statement also reveals frustration with the Revolution Bars board and the way the negotiations took place.

“The company engaged in discussions with Revolution Bars and invested significant time and resources to explore the possible offer. A non-binding proposal was submitted to the board of Revolution Bars on 17 May 2024 which, the board of Nightcap believes, presented an improved outcome for Revolution Bars’ shareholders and a significantly de-leveraged position for its creditors.

“At no point did Nightcap receive legal advice to suggest that this non-binding proposal was not capable of being delivered. The non-binding proposal did not include a fixed fundraising amount as Nightcap did not receive detailed financial information to help identify the cash requirements of Revolution Bars and the enlarged business until 21 May 2024.”

Nightcap went on to say a merger of the two businesses, would have allowed Revolution Bars’ shareholders “to suffer less dilution and achieve more value from their investment,” but also would have involved the sale of the Peach Pubs brand.

“Nightcap respects that the board of Revolution Bars wish to pursue a different outcome and as a result Nightcap today confirms that it does not intend to make an offer for the entire issued and to be issued share capital of Revolution Bars.” 

Dan Coatsworth, investment analyst at AJ Bell said: “Putting two weak things together doesn’t make a strong entity – it merely doubles the problem. That was the situation when Nightcap tried to buy Revolution Bars, a deal which has now collapsed after pushback from the latter.

“Both companies are experiencing difficult trading caused by a mixture of consumers struggling in a higher interest rate environment and younger people frequenting late-night bars less often because many aren’t interested in guzzling endless pints of beer or loading up on cocktails.

“The deal looked doomed from the start because Revolution Bars was already sorting out emergency fundraising to keep the lights on and the Nightcap offer would have scuppered that lifeline.”