So at last a spot of M&A to keep us on our toes. When a company puts out a statement, as Revolution Bars did on Tuesday, announcing that it is “in the final stages of negotiating an acquisition”, I see it as my job to find out the identity of the target before it’s revealed.
In the good old days, such deals were ten-a-penny, and the additional comment that the deal was expected to be “a substantial transaction pursuant to AIM Rule 12” certainly got my journalistic juices going.
OK, so that works out as somewhere between £2m and £20m, so not huge, but something at the top end of the range wouldn’t be a bad deal to get one’s teeth into. So I settled down with my contacts book – yes, I still have one, being an old fart! – and started flicking randomly through the pages.
I called a couple of contacts at advisory firms and bingo! My search had barely started and I already knew the identity of the business Revs was buying: Peach Pub Company. It took me another couple of calls to get some sort of guidance on price but by 9am I had ascertained that Revs was paying circa £15m for the portfolio of 21 Peach pubs in the Home Counties and Midlands.
It was clear that Revolution had been hoping to announce the deal alongside its full-year results, but the hold-up – doubtless a legal issue that bumped up the lawyers’ bills! – meant both deal and results ended up being delayed. The question was: should I get the story out now, or wait and hope that the deal would not complete until the following morning, giving me the opportunity to get a good old-fashioned scoop in The Times.
With so many internet media organs out there, I decided to go with a short, sharp Twitter scoop. Not as satisfying as a newspaper exclusive but more than adequate to get the story out there first. And sure enough, at 6pm, the Peach acquisition and Revs results both popped up on RNS.
While the 21 pubs are a lovely business (albeit all leasehold properties after being put through sale and leasebacks), well run and with a good product, the thing that occurred to me was: why is Revs buying a portfolio of country pubs? Yet Revolution and Revolución de Cuba are late-night venues. Surely there were more appropriate targets like The Alchemist and the New World Trading Co? Perhaps, but these are bigger businesses and Revs would struggle to raise the money.
That said, Rob Pitcher, the Revolution chief executive, put together a good case for buying Peach. It was, he opined, a “transformative opportunity” that “broadens our guest base, balances our day part sales and seasonality whilst providing another avenue for growth both organically and by acquisition”.
If it had been The Restaurant Group buying Peach – as it almost did a few years back – the rationale would not have needed any explanation. The pubs would immediately have slotted seamlessly into TRG’s Brunning & Price pub business: job done. Yet somehow, combining late night vodka and rum bars with country pubs just doesn’t seem to fit. Maybe, it’s me, but I don’t quite get it. I’m not sure the creation of “a more balanced and diversified business” quite cuts it. Are you telling me that until now Revs has been unbalanced? Perhaps Rob has a cunning plan that brings out the best from the Peach and Revolution businesses?
The sale of Peach, which was handled by finnCap, may not have garnered top dollar, but given the economic and political turmoil we’ve had to put up, maybe it wasn’t so bad a price after all. It certainly provides founders Lee Cash, Hamish Stoddart and Jo Eames with decent sums to start up new businesses – if that’s what they want to do.
On the subject of Revolution’s 69 premium bars, I am still trying to work out whether its full-year results contain a nasty little profit warning – or not. Like-for-like sales in the first 11 weeks fell by 10 per cent, on the back of tube strikes, heatwaves, festivals, events ad Brits going away for the summer holidays. True, the next two weeks improved to minus 4.5 per cent thanks to the return of students, but it all looks a lot like hard work - albeit nothing that most other operators aren’t suffering. Maybe balancing and diversifying is a great idea after all.
