Loungers (LON:LGRS) – Hold back from accepting the cash bid – just yet
Late last week Fortress Trust made an £338m agreed bid for this casual dining chain, which will have pleased hundreds of investors as they saw the group’s shares rise in reaction.
At the start of last week they were trading at 219p, by Wednesday night they closed at 238p, then on Thursday the bid was made, shooting the price up to 318p at one stage last Friday.
And that was actually above the 310p a share cash offer.
I understand that a number of the group’s institutional holders are not too happy with the price being offered, with many believing that the group has still more expanding to do before it is ready to be sold off to outside investors.
Fortress, which has about $48bn in assets under management, is majority owned by Mubadala Capital, which bought its roughly 70% stake in Fortress from Japan's SoftBank for $3bn in a deal that was finally completed in May.
Loungers, which was set up in 2002, has grown to encompass 280 sites across England and Wales under its Lounge, Cosy Club and Brightside brands, listed on AIM in April 2019.
Last Thursday, the Bristol-based chain reported that its pre-tax profits had jumped 51% to £5.9m in the six months to early October, on the back of a 19% jump in revenue to £178m.
The bidder already has made several investments in the UK hospitality sector and already owns Majestic Wine, Punch Pubs and Vagabond.
Earlier last month Fortress acquired the British cinema chain Curzon for, it is said, just $5m.
Way back in late July, when the shares were 268p, I commented that investors should hold very tight.
Despite this bid being an ‘agreed’ attempt, and the shares have already come up to the cash bid price, it could well pay to hold back from any acceptance until the institutions are more settled in their views about accepting or not.
You never know Fortress may be convinced that Loungers is worth paying more to get its full acceptance.
(Profile 03.09.19 @ 205p set a Target Price of 275p*)
Renewi (LON:RWI) – Take a ‘gamble’ on this price difference
It was just over a year ago that I wrote:
“My favourite waste management group Renewi is now rebuffing a £636m bid approach from the Australian asset manager Macquarie, while the hedge-fund manager Coast Capital Management has subsequently increased its stake in RWI.”
I now understand that the group’s Board rejected offers of 775p, then 810p from the Aussie-outfit, before it then backed away and took its time with a new play – which it made last week.
Renewi leverages innovation and the latest technology to turn waste into circular materials such as paper, metals, plastics, glass, wood, building materials, compost, and water.
It has the vision is to be the leading waste-to-product company in the world's most advanced circular economies, reflected in a recycling rate of continuing operations of 66.2%, one of the highest in Europe.
The group puts 6.6m tonnes of low-carbon circular materials back into use each year, which contributes to mitigating climate change and promotes the circular economy.
Its recycling efforts help to protect natural resources and prevent more than 2.5m tonnes of CO2 emissions annually.
Employing over 6,000 people across 151 operational sites in five countries in Europe, the group is recognised as a leading waste-to-product company in the Benelux region and a European leader in advanced recycling.
Last Thursday it was announced that Macquarie Asset Management and Renewi had reached ‘preliminary agreement’ on the terms of an offer for the waste management group, worth 870p in cash.
It looks as though this could well turn out to be the winning approach, with the group’s shares responding with a climb in price to 823p at the best on Thursday, before easing back to the current 806p.
Now that, certainly in market terms, is quite a discount to such a cash bid price – 806p against 870p cash.
That is possibly why gamblers are snapping away a few of the Renewi shares while they are so out of line with the ‘possible’ bid.
I warn and repeat that at this stage it is still only a ‘possible’ offer.
Renewi is said to have demanded that to get its agreement then Macquarie has to table a Formal Offer by Boxing Day.
Looks like a good gamble to me – after all Macquarie has stalked Renewi for a very long time – I don’t think that it is ‘wasting’ this one!
(Profile 09.10.20 @ 240p set a Target Price of 350p*)
(Asterisks * denote Target Prices have been achieved since Profile publication)
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