Revolution outlines reasons for concerns over proposed merger with Deltic

Propel Info, 9th October 2017

Revolution Bars Group has responded to Deltic Group’s merger proposal and said its concerns remain over the value and deliverability of a combination of the businesses. Deltic outlined its merger terms on Thursday (5 October), which provides for a combination under which existing Revolution shareholders would own 65% and Deltic shareholders 35% of the enlarged and listed group. The enlarged group would be run by the current Deltic management team. Revolution has again said a merger is not in the best interests of the company and has outlined its reasons why, in the absence of a cash offer from Deltic, maintained its recommendation that shareholders should accept the 203p per share offer from Stonegate. Revolution said: “In the company’s announcement of 15 August 2017, the company stated the board had concerns over both the value and deliverability of a proposed combination of Revolution and Deltic. These concerns remain. The board draws the attention of Revolution shareholders to the following key points. The board does not believe the merger proposal would create shareholder value for Revolution’s existing shareholders in excess of the certain and immediate value represented by the recommended 203p cash offer from Stonegate Pub Group, which would be received by Revolution shareholders in early November 2017 if shareholders vote in favour of Stonegate’s offer on 17 October. There is no certainty or guarantee the Deltic management team would be able to deliver either their forecast financial performance or the estimated cost synergies of the enlarged group that are presented in the Deltic merger proposal announcement. Deltic’s reported cost synergies have been developed without direct involvement from Revolution and Deltic acknowledges the level of cost synergies might vary with engagement. The board is of the view the company’s business operations and financial performance may suffer if the cost synergies are implemented. Deltic’s merger proposal would result in much greater indebtedness of the enlarged group compared with the current indebtedness of the company. There is no guarantee that market participants would ascribe a valuation rating to the enlarged group that would be sufficient to contribute to a Revolution shareholder return in excess of the certain cash return offered by Stonegate. The merger proposal is not binding and it is the board’s view that a transaction would take several months to complete and in any event would not be completed until the first half of the next calendar year. The board encourages Deltic to make a cash offer for Revolution rather than continuing to focus on its current merger proposal.” Keith Edelman, non-executive chairman of Revolution, added: “The board does not believe that the pursuit of a merger with Deltic is in the best interests of the company or its shareholders and, in the absence of a firm cash offer from Deltic, maintains its unanimous recommendation that shareholders should vote in favour of Stonegate’s offer at the Revolution shareholder meetings on 17 October 2017.”