Fortress Investment Group is pushing further into the the U.K.’s hospitality sector with its acquisition of pub and restaurant chain Loungers for £351 million ($428 million).
Fortress said in a Thursday filing that it would pay 310 pence for each share of Loungers, which represents a premium of about 30% to its closing price on Wednesday.
The New York-based investment group said that it believes Lounger’s market value has failed to adequately reflect the hospitality chain’s positive business performance.
Founded in 2002, Loungers has grown to encompass 280 sites across England and Wales under its Lounge, Cosy Club and Brightside brands. It listed on London’s Alternative Investment Market (AIM) in April 2019.
The Bristol-based chain reported the same day that its pre-tax profits had jumped 51% to £5.9 million in the six months to early October. Loungers’ revenue was £178 million in the same period, a jump of 19%.
Loungers’ cofounder and Chairman Alex Reilley said: “We are more ambitious than ever, and we see Fortress as being an ideal partner to help us take Loungers into the next phase of its growth journey.”
Fortress’s investments in the U.K.’s hospitality industry already includes Majestic Wine, Punch Pubs and Vagabond. The group’s acquisition of Loungers is based on what it feels is a “strong and differentiated position in its industry.”
Fortress’s Managing Director Domnall Tait said that Loungers had delivered “impressive increases” in the number of locations, same-store sales and revenues over the past few years “in spite of the recent challenges faced by the wider hospitality sector.”
Earlier this month, Fortress bought the British cinema chain Curzon for a reported $5 million. Curzon had been put up for auction after the American billionaire Charles Cohen had defaulted on a $534 million loan from Fortress.
Fortress has about $48 billion in assets under management. The group is majority owned by Mubadala Capital, which bought its roughly 70% stake in Fortress from Japan’s SoftBank for $3 billion in a deal that was finally completed in May.
The transaction, which had been agreed almost a year earlier, needed approval from the Committee on Foreign Investment in the U.S. (CFIUS). Mubadala is the investment arm of Abu Dhabi’s sovereign wealth fund, which has $302 billion in assets under management.
SoftBank had acquired Fortress in 2017 for $3.3 billion with the aim of using the firm’s expertise to help manage its Vision Fund. When Fortress became the first of the private equity groups to go public in early 2007 at the peak of a leveraged buyout boom, it was valued at $7.4 billion, and turned five of its principals—Wesley Edens, Robert Kauffman, Randal Nardone, Peter Briger and Michael Novogratz—into billionaires.
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