23 January 2007 – The Journal (Newcastle)
Bar and club operator Ultimate Leisure is to raise £75m for a war chest to use to buy out rival companies.
The Newcastle company, which already operates 36 sites around the country, is to issue new shares to raise £25m – and its bankers are also providing a `241′ facility to take the firm’s acquisition funds up to the £75m figure.
Chairman Mark Jones has already identified companies he’s interested in buying, and says he will be looking at the premium end of the market.
While Ultimate is best known for its `vertical drinking’ expertise with Newcastle nightclubs, like Sea and blu-bambu, the company is now diversifying.
Mr Jones has been expanding the business’s chain of upmarket Prohibition bars, and says he is acutely aware there is only a certain number of early-20s drinkers in the marketplace, so he needs Ultimate to appeal to a wider demographic.
The 14,792,900 new ordinary shares will be priced at 169p each and will be bought by Ultimate’s two largest investors – property magnates the Reuben Brothers and the US-based Dawnay, Day Group.
Making the added investment in shares will increase both those shareholders’ stakes in Ultimate to above 30% – the level at which the Takeover Code normally requires the shareholders concerned to launch a bid for the entire business.
But Ultimate said yesterday the panel on takeovers and mergers has agreed to waive this requirement if the company’s remaining shareholders agree to `whitewash’ waivers at an extraordinary general meeting of Ultimate.
Mr Jones said: “With the repositioning of the business through an extensive investment in refurbishment, marketing and training, largely completed, we are now looking to taking the group forward to the next stage of its development.
“The roll-out of Prohibition is already being funded by bank debt and cash flow. This today is entirely separate funding, to take the business to a very different place.This fundraising will be used principally to buy companies.”
Mr Jones has been pursuing a three-phase strategy – firstly `reinvestment and refurbishment’; then fundraising and buying the companies (phase two), and, thirdly, integrating the acquisitions into the existing business.
The chairman said this process would take advantage of Ultimate’s strong back office systems, to bring value to the shareholders.
He said he would be seeking to buy operators who serve the premium end of the leisure marketplace, including serving food, and attract a broader base in age profile than some bars.
Last week Ultimate acquired The Cotton Factory bar and lounge in Huddersfield from Daisy Chain Inns for £3.3m, taking its estate to 36 sites.
For an analysis of the state of the North-East’s bar sector see northern business daily tomorrow.