TDR-backed Stonegate inches towards £102m Revolution bolt-on

The proposed deal has been recommended to shareholders by Revolution's board of directors. To date, Stonegate has received irrevocable undertakings from directors holding a combined 2% stake in Revolution and Castlefield Fund Partners, which holds 4.2%. It has also received letters of intent to vote in favour of the deal accounting for a combined 14.8% stake in the group.

The target company's board has agreed to an offer of 203 pence per share, equivalent to a premium of 62.4% compared to the 125 pence closing price on 28 July.

The scheme document – which will outline the dates for the court meeting and general meeting during which shareholders will vote on the proposed deal – will be issued to shareholders within 28 days.

Linklaters is advising Stonegate in connection with the deal, while Macfarlanes is advising Revolution.

Founded in 1996 and headquartered in Ashton-under-Lyne, Tameside, Revolution operates 54 bars in towns and cities, with a focus on cocktails. These include the group's Revolución de Cuba brand, which incorporates 14 Latin American themed bars that offer primarily rum-based cocktails, Latin American food and live entertainment.

According to publicly available documents, the business generated a turnover of £119.5m with adjusted EBITDA of £15.6m in its most recent financial year.

The transaction comes seven years after TDR first invested in Stonegate and 18 months after the GP launched an annex fund to inject fresh cash into the remaining companies in TDR II. A market source recently told unquote" that TDR raised €835m for this fund, with Stonegate highlighted as one of the busnesses requiring further investment, alongside life insurance provider Retirement Advantage.

Under TDR's tenure, Stonegate has undertaken an acquisitive expansion strategy that has increased the company's estate from 333 pubs to 689 (prior to the Revolution acquisition). The business operates under various brands including Slug and Lettuce, Walkabout and Yates.

TDR's initial investment in Stonegate saw it acquire 333 managed pubs from UK operator Mitchells & Butlers for £373m in August 2010.

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