An investor battle has erupted over a private equity bid for Cosy Club and Brightside operator Loungers, with some “furious” over the perceived low offer.
On Thursday, the Loungers board backed a £338m takeover offer from Fortress Investment Group, a 30 per cent to its share price.
Despite the board accepting the offer, various shareholders have come out strongly against the deal, arguing that it undervalues the AIM-listed firm.
Gresham House, which holds almost a four per cent stake in Loungers, said it would vote against the offer, which it argued attempted to take advantage of a low share price “at the worst possible time” thanks to a decline in consumer businesses following the Budget.
“Fortress’s bid for Loungers looks opportunistic and substantially undervalues the long-term prospects of the business in our view,” Ken Wotton, managing director of public equity at Gresham House argued.
“This is not in the interests of all shareholders, particularly those unable to take up the opportunity of rolling into the private vehicle, as some of the board and large shareholders intend to do and capture the long-term upside.”
Head of Downing Fund Managers Judith Mackenzie, which owns a 1.5 per cent stake in Loungers, said she was “absolutely furious” over the accepted offer.
The backlash from investors came after an initial wave of disappointment from larger shareholders when the deal was announced on Thursday.
Slater Investments, which owns more than 10 per cent of Loungers, and Axa Investment Management, owning over 4 per cent, stated on the day of the announcement that they would not support the bid.
Dan Harlow, head of UK equity at Axa, said he was “underwhelmed” with the offer, adding: “To see the company leaving the public market now is galling.”
However, Canaccord Genuity Asset Management, which holds around 1.7 per cent of Loungers’ stock, has since announced it would be backing the deal.
“It was only a matter of time before Loungers was taken over as it never seemed to click with the market despite showing considerable progress since floating in 2019,” said AJ Bell investment analyst Dan Coatsworth.
“So many UK-listed companies are being taken over because the market didn’t spot the value on offer.”
Axa’s Harlow added: “The derisory valuation ultimately reflects both apathy within UK markets and specific caution related to this sector right now.”