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Company Announcements

Merger Proposal

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By LSE RNS

RNS Number : 7509S
Deltic Group (The)
05 October 2017
 

THIS ANNOUNCEMENT IS FOR INFORMATIONAL PURPOSES ONLY, AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF AN OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY SECURITIES.

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR TO ANY PERSON LOCATED OR RESIDENT IN, ANY JURISDICTION WHERE IT IS UNLAWFUL TO RELEASE, PUBLISH OR DISTRIBUTE THIS ANNOUNCEMENT. 

 

5 October 2017

 

THE DELTIC GROUP LIMITED AND RANIMUL 1 LIMITED

 

 MERGER PROPOSAL

 

Further to the announcement made by the Deltic Group Limited on 20 September 2017, Deltic and its holding company Ranimul 1 Limited ("Ranimul" and, together with Deltic Group Limited, "Deltic") today announce their proposed terms for a merger (the "Merger Proposal") with Revolution Bars Group plc ("Revolution") (together, the "Enlarged Group"). The Merger Proposal provides for a combination under which existing Revolution shareholders would own 65% and Ranimul shareholders 35% of the Enlarged Group (subject to the statements set out in the section below headed "Reservations"). Deltic will engage actively with shareholders from the date of this announcement until 5.00 p.m. on 10 October 2017 to discuss the Merger Proposal. It has also granted due diligence access to Revolution and continues to seek meaningful engagement with Revolution for its board of directors to fully analyse the Merger Proposal.

Notwithstanding its strong preference for the Merger Proposal, Deltic has until 5.00 p.m. on 10 October 2017 either to announce a firm intention to make an offer for Revolution under Rule 2.7 of the City Code on Takeovers and Mergers (the "Code") or announce that it does not intend to make an offer for Revolution.

Deltic emphasises that there can be no certainty that an offer or other proposal will be made for Revolution nor as to the terms on which any offer may be made.

This announcement is not being made with the consent of Revolution.

 

Merger Proposal Key Highlights

 

Under the Merger Proposal:

·     The Enlarged Group would be run by the current Deltic management team

·   The Enlarged Group should benefit from approximately £6.8 million of currently identified pre-tax cost synergies and approximately £0.9 million of pre-tax financing synergies (see Appendix 2 for further details)

·     The Enlarged Group would maintain its premium listing on the main market

·     The Enlarged Group is expected to be highly cash generative and financed conservatively with gearing no higher than 1.5x "Adjusted EBITDA", such measure defined as earnings before interest, tax, depreciation, amortisation, exceptional items (including exceptional launch costs for refurbished businesses) and transaction costs associated with the Merger Proposal

·     There will be no change to Revolution's existing dividend policy

·     A transaction can be expedited rapidly and without significant incremental cost

·     A merger with Deltic offers the opportunity to accelerate Revolution's strategy set out at the time of its IPO

·     Deltic believes that significant value will be created for existing Revolution shareholders

Background and Reasons for the Merger Proposal

Revolution was floated at 200 pence per share in March 2015 (the "IPO"). At the time, the Revolution prospectus stated that:

 

"The Group's strategy is focused on a measured roll-out of new bars….as well as delivering continued growth through enhancing its existing estate. The Directors would consider corporate acquisitions in the event that a suitable opportunity arose. The Directors' view is that the Group's opportunities to grow by bar acquisition, coupled with improvements to its existing bars, are significant".

 

Deltic believes that the Merger Proposal is exactly the type of transaction which Revolution's stated IPO strategy was intended to implement.

 

As noted in the scheme document posted on 20 September 2017 in relation to the offer by Stonegate Pub Company Limited ("Stonegate") for Revolution (the "Stonegate Scheme Document"), Revolution has stated that:

 

"Since flotation, the Revolution Group's estate has grown from 58 bars to 68 bars and revenue has grown from £108.7m in the financial year ended 30 June 2014 to £130.4m in the 52 weeks ended 1 July 2017. Underlying sales have been consistently strong, with the Revolution Group delivering like-for-like sales growth in each reporting period since listing."

 

Despite such a strong underlying performance, in the Stonegate Scheme Document, Revolution claimed that:

 

"The Revolution Group's cost base has grown by more than expected as a result of increases in wage costs (triggered by the National Living Wage), the introduction of the apprenticeship levy and significant rises in business rates following the issue of new rateable values arising from the government's 2015 revaluation effective from April 2017."

 

Finally, the Revolution directors stated in the Stonegate Scheme Document that:

 

"Prior to [the announcement by Revolution of a possible offer from Stonegate on 31 July 2017], the Revolution Directors believe that the trading in Revolution's shares in the two months following the [trading update published by Revolution on 19 May 2017] had not indicated that Revolution's share price was likely to return to the 200 pence level in the near term."

 

Deltic considers that this explanation lacks credibility as such increases would have only affected thirteen weeks of the financial year and much of these cost increases were announced by the Government months before and, as such, they should have been factored in, fully understood and addressed. Following the trading update of 19 May 2017, Revolution shares dropped from 203p to 105.5p on 3 July 2017 yet subsequent announcements indicate that the underlying business remains on target and in growth.

 

Deltic believes that such headwinds are already well known in Revolution's operating market and that Revolution's response to mitigate them has been slow and defeatist. Deltic believes Revolution is a great business in its own right, which a more focused and effective management team can exploit alongside Revolution's excellent operations staff to restore underlying profitable growth through simple stand-alone measures, including enhancing margins and cutting out excessive head office costs. That leading industry operators such as Deltic and Stonegate can reach this conclusion is a poor indictment of the decision to recommend the Stonegate offer, where ostensibly returning the IPO value to shareholders is seen as the best outcome for Revolution shareholders, rather than identifying it as the opportunistic offer Deltic believes it more rightly is.

 

Ever since Deltic's first approach to Revolution, Deltic has been disappointed by Revolution's level of engagement: a short initial delay in granting Deltic access to due diligence as required under the Code; an instant dismissal of the idea that a merger could be in the interests of Revolution shareholders; and finally, once tabled, a complete rejection of Deltic's formal Merger Proposal with an indication that there was no scenario under which a Deltic/Revolution merger would be more attractive than the Stonegate offer. Only belatedly, subsequent to Deltic's announcement on 20 September 2017, has Revolution indicated any interest in conducting due diligence on Deltic but whilst also reconfirming that its directors' interest in pursuing Deltic's proposal had not changed. Given the attitude of Revolution towards Deltic's proposal, Deltic did not at that time see any merit in providing due diligence access.

 

Accordingly, Deltic has determined that the Merger Proposal, improved from the only proposal tabled to Revolution's board, is best shared directly with Revolution shareholders as it is they who ultimately need to determine the future of Revolution rather than its directors. In order to enable Revolution to form its own opinion on the Merger Proposal, Deltic has also now granted due diligence access on its business to Revolution.

 

Deltic believes the Merger Proposal represents a compelling value creation opportunity for Revolution and its shareholders and would welcome the opportunity to engage with the board of Revolution on a constructive basis with the goal of consummating a transaction in the event that the scheme vote on Stonegate's proposal lapses or is adjourned and/or Deltic chooses not to announce a firm intention to make a cash offer for Revolution.

 

Strategic Rationale

 

The combination of Revolution and Deltic would create a strong business of significant scale and expertise in the UK's late night market, with both entities exhibiting a similar modus operandi.

 

The town centre market remains fragmented and a combination of Deltic with Revolution will be well placed to penetrate their local markets alongside other operators of scale such as Wetherspoons, Stonegate and Mitchells & Butler.

 

The Enlarged Group would:

 

·     Combine the expertise of Deltic, as the leading late night entertainment-led operator in the UK, with that of Revolution, as one of the leading premium branded daytime and evening bar and food operators, to create a market leading business to provide great customer experiences and in so doing create the opportunity to drive a higher per customer spend

·    Increase the scale and breadth of the target market for customers. Typically Deltic customers are a little younger than Revolution customers who in turn are a little younger than Revolución de Cuba customers and this, combined with a high degree of estate overlap, will create opportunities to improve the effectiveness of customer promotions and marketing while limiting concerns over cannibalisation

·      Develop closer ties with premium drinks brand owners

·     Have the scale to provide a more robust financial environment better able to withstand any localised trading issues that may occur from time to time

·   Unlock material cost and revenue synergies yielding higher margins and increased profitability through combined buying power and sales ability

·     Deliver strong cost control

·    Utilise the increased cashflow and expertise of the Enlarged Group to enable funding and sourcing of a faster-paced rollout of both Revolution and Deltic sites, noting that Revolution has already secured a promising pipeline of sites

·     Combine the best of Deltic's and Revolution's industry-leading sales, e-marketing, social media and single customer view marketing programmes to drive further growth in revenues with improved efficiencies through cross-selling and marketing, developing customer experience programmes and sharing of market trends

·     Become a powerful force within the sector that would attract, train and retain the best people

·     Benefit from a potential re-rating of its shares to reflect the greater scale, synergy opportunities and more focused management

As a result, Deltic believes that the Merger Proposal is likely to generate a return on investment significantly in excess of that which would be available from holding Revolution shares on a standalone basis and is therefore a compelling opportunity for the shareholders of Revolution.

The Merger Proposal

 

Under the terms of the Merger Proposal, subject to Revolution shareholder approval, Ranimul would merge its business with that of Revolution such that, post-merger, current Revolution shareholders would own 65% of the shares in the Enlarged Group (as enlarged by the issuance of shares to Ranimul's shareholders) with Ranimul shareholders owning 35% of the Enlarged Group. The proposed ratio assumes there is no increase in the share capital of Revolution or grant of share awards or other rights over shares up to and upon completion of the Merger Proposal, and the ratio may be amended if there are any such increases or grants.

 

In determining its Merger Proposal, Ranimul has analysed the combination through a number of historic and forecast revenue and earnings measures. Ranimul's forecast revenue for the period ending June 2019 (on a time apportioned basis calculated as described below) would represent approximately 40.8% of the revenue of the Enlarged Group when combined with Revolution's forecast revenue for the period ending June 2019 (as derived from the consensus forecasts set out in Appendix 3). Profit metric comparisons are reasonably consistent with this proportion save that they are not directly comparable since Ranimul reports under FRS102 whereas Revolution reports under International Financial Reporting Standards ("IFRS"). The respective contributions of profit after tax of Ranimul and Revolution are additionally impacted by (1) Ranimul being part funded through a £22.3 million shareholder loan (as of 25 February 2017) with an 8% coupon (the "Ranimul Loan"), which it is proposed would be refinanced, as a condition to the Merger Proposal, with a commercial loan at an indicative interest rate of LIBOR plus 2.5% and (2) Ranimuls's finance leases in its reported interest.

 

If the Merger Proposal is agreed with Revolution and put to Revolution shareholders, a reconciliation of Ranimul's historical financial information to IFRS will be prepared.

 

Ranimul has made a preliminary assessment of cost synergies for the Enlarged Group and has identified recurring annual pre-tax cost savings of approximately £6.8 million and pre-tax financing synergies of approximately £0.9 million. This constitutes a quantified financial benefits statement under the Code and, accordingly, has been reported upon by Deloitte LLP ("Deloitte") and Stifel Nicolaus Europe Ltd ("Stifel") as set out in Appendix 2. Ranimul also believes that the Enlarged Group would benefit from revenue and capital expenditure on new openings synergies but believes these would best be appraised jointly with Revolution.

 

The highly cash generative nature of the Enlarged Group is expected to support a continuing progressive dividend policy from its current base of 4.95 pence per share, whilst providing sufficient headroom to have modest levels of gearing (of no more than 1.5x Adjusted EBITDA) and supporting maintenance and refurbishment capital expenditure programmes alongside a targeted pipeline of new openings and other revenue initiatives. It should be noted that according to Revolution's announcement of 3 October 2017, the final dividend of 3.3 pence per share which would normally be expected to be paid on 7 December 2017 will not be paid if the scheme of arrangement relating to the Stonegate proposal completes prior to Revolution's Annual General Meeting.

 

Deltic proposes that Bob Brannan, Peter Marks and Alex Millington, current Deltic Chairman, Chief Executive and Group Finance Director, respectively will take similar roles in the Enlarged Group, complemented by appropriate independent non-executive directors, who believe in the UK late night segment and can bring experience and scrutiny to the board of the Enlarged Group. The Deltic management team have outstanding leisure experience and includes one of the most highly respected operators in the industry in Peter Marks, who was formerly a director of Northern Leisure plc and has a track record of creating significant shareholder value in the public markets. Deltic has the greatest respect for the achievements of Revolution's operating team and its employees and would welcome the opportunity to engage with the board of Revolution to discuss the future shape of the Enlarged Group.

 

Ranimul considers that its Merger Proposal should result in sharing a disproportionately favourable merger ratio and synergies to the benefit of Revolution's shareholders, and is willing to do so not least because it demonstrates Ranimul's confidence in the future potential of Revolution and current low implied value. By combining the businesses and extracting the synergy opportunities, Ranimul believes the Merger Proposal creates the opportunity to grow a business with a value very significantly in excess of that represented by Stonegate's offer over the two years following a merger becoming effective.

 

Merger Proposal Financial Highlights

 

In analysing the potential impact of the Merger Proposal, Deltic has:

·    taken into account market consensus estimates for Revolution, which are set out in Appendix 3 to this Announcement, and Ranimul's own profit forecasts to its year end of February 2021 (see Appendix 1 below)

·    applied anticipated synergies arising through the merger (as set out in the quantified benefits statement which is reported upon in Appendix 2 below)

·    assumed a refinancing of the Ranimul Loan with a term loan at an indicative interest rate of LIBOR plus 2.5%, effected on the merger becoming effective

·     applied an effective rate of tax of 19% to the expected synergies, being the prevailing rate of taxation in the UK

·    time apportioned Ranimul's forecasts to present illustrative forecast information for the periods ending June (which is co-terminous with Revolution year ends). Such time apportionment has been calculated for the periods ending June 2019 and June 2020 by taking eight out of the twelve months comprising the forecast information for the period ending February 2019 and February 2020 respectively (assuming each month is equal) and four out of the twelve months comprising the forecast information for the periods ending February 2020 and February 2021 respectively (assuming each month is equal). Accordingly, such information is illustrative only and should not be taken as a forecast or estimate of the financial period in question.

The tables below set out:

(a)     the illustrative forecast numbers for Ranimul extracted from its profit forecasts and presented for the years ending June 2019 and June 2020 on such time apportioned basis; and

(b)      the forecast numbers for Revolution derived from the consensus forecasts set out in Appendix 3 for the years ending June 2019 and June 2020.

The figures presented in this table are not directly comparable, including for the reason that Deltic reports under FRS102 whereas Revolution reports under IFRS.   

 

Ranimul (illustrative for year ending June 2019 on time-apportioned basis)

£ million

Revolution (consensus year ending forecast for June 2019)(3)

£ million

Synergies (as set out in Appendix 2)

£ million

Revenue

110.4

160.3

Not quantified

Adjusted EBITDA(1)

16.6

19.1

5.4

Profit after tax(2)

4.3

8.7

5.1(4)

 

 

Ranimul (illustrative for year ending June 2020 on time-apportioned basis)

£m

Revolution (consensus year ending forecast for June 2020)(3)

£m

Synergies (as set out in Appendix 2)

£m

Revenue

117.9

175.2

Not quantified

Adjusted EBITDA(1)

18.4

20.2

6.8

Profit after tax(2)

5.1

9.6

6.2(4)

 

Notes:         

(1) "Adjusted EBITDA" is earnings before interest, tax, depreciation, amortisation, exceptional costs items (including exceptional launch costs for refurbished businesses and profit/loss on disposal) and transaction costs associated with the Merger Proposal.

(2) "Profit after tax" is before transaction costs associated with the Merger Proposal.

(3)  Consensus forecast figures are the arithmetic mean of the relevant investment analysts' forecasts for the period and in the case of profit after tax calculated by multiplying such forecast of earnings per share by the current number of Revolution shares in issue - see Appendix 3 for details of the basis on which the consensus forecasts are compiled.

(4)   Calculated as the impact of cost synergies plus the impact of the Ranimul Loan refinancing (both as set out in Appendix 2), against which an assumed effective tax rate for the synergies of 19% is applied. The statements of estimated cost savings and synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. Further, in considering and reviewing the estimated cost savings and synergies, the directors of Ranimul have used only publicly available sources of information relating to Revolution and due diligence information provided by Revolution. As a result, the cost savings and synergies referred to may not be achieved, or may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. No statement (other than the Ranimul Profit Forecast and the Ranimul Long Term Forecasts) should be construed as a profit forecast or interpreted to mean that the Enlarged Group's earnings in the first full year following a merger, or in any subsequent period, would necessarily match or be greater than or be less than those of Deltic and/or Revolution for the relevant preceding financial period or any other period.

Deltic believes that this provides strong support to its view that the Merger Proposal creates the opportunity for a rapid appreciation in value, before taking into account the possibility of further changes arising from any potential re-rating of Revolution shares to reflect the increased scale, following the successful completion of the Merger Proposal and installation of the new management team. Deltic would invite shareholders in Revolution to carry out their own analysis and to conclude the impact on likely share price progression relative to the Stonegate offer price of 203 pence per share (taking into account the fact that the Revolution final dividend is not expected to be paid). 

Ranimul forecasts

Ranimul is a private company. As such, in order for shareholders in Revolution to be able to appraise for themselves the impact of the Merger Proposal, Ranimul has set out below its forecast financial performance in each of the following financial years.

Key highlights are as follows:

 

February 2018

£ million

February 2019

£ million

February 2020

£ million

February 2021

£ million

Revenue

106.1

108.4

114.5

124.7

Adjusted EBITDA(1)

14.1(3)

16.0

17.8

19.6

Profit after tax(2)

2.7(3)

4.1

4.8

5.8

Maintenance capex

1.3

1.4

1.4

1.5

Refurbishment capex

6.1

6.5

4.8

4.0

Pipeline capex

-

2.0

4.0

6.0

Net debt(4)

7.2

6.9

4.9

2.3

 

Notes:

(1) "Adjusted EBITDA" is earnings before interest, tax, depreciation, amortisation, exceptional costs items (including launch costs for refurbished businesses and profit/loss on disposal) and transaction costs associated with the Merger Proposal.

(2) "Profit after tax" is before transaction costs associated with the Merger Proposal.

(3) These measures form part of the Ranimul Profit Forecast and are prepared on "not lower than" basis as described in Part A of Appendix 1 to this announcement.

(4)  Net debt includes third party loans, the Ranimul Loan and finance leases.

In Deltic's experience, a nightclub estate must be well invested in order to generate great customer experience and therefore profitability. The estate taken on by Deltic from the administrators of Luminar Plc had become significantly under-invested and since then an extensive programme of refurbishments has been undertaken which has underpinned the growth in profitability. Investments made under this programme of refurbishments have typically resulted in a return on investment ("ROI") in excess of 40% which underpins Deltic's view that a well-invested nightclub in a well-invested high street has a long-term profitable future. This initial programme of intensive refurbishment, which included significant investment in the plant, equipment, sanitary ware and flooring of its venues will be completed in the year ending February 2019 and as such it is anticipated that refurbishment capex for the next full cycle will reduce with the hard-wearing items not needing replacement. This, combined with the strong cash-flow generation over the programme period will provide the resources for significant expansion of the estate through both strategic acquisition and new sites with such investment conservatively budgeted to deliver an ROI of 33%, in line with that reported by Revolution.

Ranimul demonstrated its ability to deliver impressive levels of growth between the years ended February 2013 to February 2016 - with reported EBITDA growing from £7.3 million to £13.6 million during that period, in which it also acquired the 8-strong Chicago chain of clubs and fully integrated them into its business within six months of acquisition.

While growth in the year ended February 2017 was more muted (with Adjusted EBITDA for that year of £13.3m), this was a transitional year in which Ranimul addressed the cost headwinds facing its sector and resolved an unforeseen localised competitive trading issue. The Ranimul Profit Forecast (as defined below) demonstrates the return to growth in Adjusted EBITDA for the year ending February 2018 and with strong early demand from returning students and for special events such as Halloween and Christmas, current like for like revenue performance on the core weekend nights is very strong. The cost base now includes the run-rate of the cost headwinds and in spite of this, cash generation is at an all-time high. With refurbishment capex forecast to decrease, Deltic has now built a pipeline of potential sites and expansion opportunities and is as such forecasting to return to accelerating growth in the year ending February 2019.

The forecast Adjusted EBITDA and Profit After Tax for the year ending February 2018 set out in the table above constitute a profit forecast for the purposes of Rule 28 of the Code (the "Ranimul Profit Forecast"). As required by Rule 28.1(a) of the Code, the Ranimul Profit Forecast has been reported on by KPMG LLP ("KPMG") (as reporting accountants to Ranimul in relation to the Ranimul Profit Forecast) and Stifel (as financial adviser to Ranimul). Please refer to Appendix 1 to this announcement for further detail on the Ranimul Profit Forecast, including the principal assumptions on which it is based, and the KPMG and Stifel reports. References in this announcement to the Ranimul Profit Forecast should be read in conjunction with Appendix 1.

 

The forecast Adjusted EBITDA and Profit After Tax set out in the table above for each of the financial years ended February 2019 to February 2021 inclusive (the "Ranimul Long Term Forecasts") constitute profit forecasts for the purposes of Rule 28 of the Code. In accordance with Rule 28.2 of the City Code, the Panel has granted Ranimul a dispensation from the requirement to include reports from reporting accountants and Ranimul's financial advisers in relation to the Ranimul Long Term Forecasts because they are for financial periods ending more than 15 months from the date of this announcement, which is the date on which they are first published. Neither KPMG nor Stifel has reported on the Ranimul Long Term Forecasts.

 

The directors of Ranimul confirm that the Ranimul Profit Forecast and the Ranimul Long Term Forecasts have been properly compiled on the basis of the assumptions stated in Part A of Appendix 1 and that the basis of accounting used is consistent with Ranimul's accounting policies.

 

Further details of the Ranimul Long Term Forecasts are set out in Appendix 1 to this announcement. References in this announcement to the Ranimul Long Term Forecasts should be read in conjunction with Appendix 1.

 

Synergies

 

Ranimul expects that the Merger Proposal would generate synergies that could not be achieved independently of the Merger Proposal and which will lead to substantial value creation for all shareholders. Ranimul expects that the Merger Proposal will result in currently identified recurring annual pre-tax cost savings of approximately £6.8 million, fully realised by the end of the second full year (year ending 30 June 2020) following completion of a merger. The expected sources of the identified cost synergies are as follows:

 

·     Headcount reductions: Approximately 45% of the identified synergies are expected to be generated from headcount rationalisation, in areas where Deltic has identified an overlap exists, or where the operational management structure that Deltic plans to employ allows other headcount reductions.

·   Rationalisation of central costs: Approximately 20% of the identified synergies are expected to be generated from the rationalisation of certain central costs. Deltic has reviewed the cost base of Revolution and believes that savings could be made in the following areas:

-    Removal of overlap in the use of external design and marketing agencies

-    Merging the IT, Business and EPOS systems and contracts of the two businesses

-    Removal of overlap in areas such as professional and recruitment fees

·    Procurement and supply savings: Approximately 30% of the identified synergies are expected to be generated from benefits to the Enlarged Group in the purchasing of drinks, food and other areas, through the sharing of best practices and increased buying scale.

·    Other savings: The remaining savings (approximately 5%) are delivered through efficiencies of larger scale in operational process and from Deltic's view of specific areas where cost savings can be delivered through Deltic's own experienced cost-mitigation activities in such areas.

The board of Ranimul expects it would deliver these synergies progressively, expecting to realise approximately 10% in the year to 30 June 2018, 80% in the year to 30 June 2019 and 100% in the year to 30 June 2020 (assuming, for these purposes, that completion of the merger occurs by 31 December 2017).

In addition to the cost synergies described above, the Ranimul Loan would be refinanced as a condition precedent to the transaction. The impact of this refinancing would result in an improvement in net earnings before tax of an additional (approximately) £0.9 million in the year ending June 2019.

 

The synergies created by a refinancing of the Ranimul Loan are assessed based on a refinanced loan cost of LIBOR plus a 2.5% margin, assuming LIBOR at 0.5%, with the loan assumed to have a 10 year amortisation profile. Over time, as EBITDA to senior debt leverage is planned to reduce, Deltic anticipates the 2.5% margin will similarly decline. Given the nature of the saving, Deltic expects the full saving of approximately £0.9 million to be achieved in the first full year following the completion of a merger.

 

It is expected that the realisation of the identified synergies would result in one-off restructuring and integration costs (excluding any costs associated with the refinancing of the Ranimul Shareholder Loan) of approximately £3 million, the majority of which it is anticipated would be incurred by the end of the second year following completion of a merger. Aside from these integration costs, the directors of Ranimul do not expect any material dis-benefits to arise in connection with the Merger Proposal. The expected synergies are expected to accrue as a direct result of the Merger Proposal and could not be achieved independently of the Merger Proposal.

 

The cost synergies set out above have been developed without direct involvement from Revolution therefore it is anticipated that this number might vary with engagement.

 

The paragraphs above relating to expected cost synergies constitute a quantified financial benefits statement for the purposes of Rule 28 of the Code (the "Quantified Financial Benefits Statement"). As required by Rule 28.1(a) of the Code, the Quantified Financial Benefits Statement has been reported on by Deloitte LLP (as reporting accountants to Ranimul in relation to the Quantified Financial Benefits Statement) and Stifel (as financial adviser to Ranimul). Please refer to Appendix 2 to this announcement for further detail on the Quantified Financial Benefits Statement, including the bases of belief (and principal assumptions and sources of information) supporting it, and the Deloitte LLP and Stifel reports. References in this announcement to the Quantified Financial Benefits Statement should be read in conjunction with Appendix 2.

 

In addition to these cost savings, Ranimul believes there are also (i) material revenue synergies from combining the businesses through greater effectiveness of the combined sales and marketing teams; and (ii) material capex synergies from the potential streamlining of venue opening costs, which in each case are not factored into its current analysis (including in relation to working capital and tax). Deltic would welcome the opportunity to engage in discussions with Revolution to further explore these benefits which would accrue to all shareholders.

 

Implementation of the Merger Proposal and Indicative Timetable

Any implementation of the Merger Proposal will be subject to the scheme relating to Stonegate's proposal lapsing and to Ranimul not announcing a firm intention to make a cash offer for Revolution.

 

Based on its analysis, Ranimul believes that the Merger Proposal would not be deemed a reverse takeover by the UKLA. It would therefore not necessitate a prospectus to be prepared on the Enlarged Group, in turn reducing costs and timing to complete a transaction.

 

Rather, if the Merger Proposal is to be implemented, it is expected to constitute a Class 1 transaction for the purposes of the Listing Rules, and as such it would require the approval of 50% of those Revolution shareholders who vote on the appropriate resolutions at a general meeting of Revolution shareholders called for such purpose. Consequently, Deltic believes that the timetable to complete the merger would be approximately two to three months (if, as it expects, a prospectus is not required).

 

As Ranimul shareholders would own, if the Merger Proposal is implemented, in excess of 30% of the voting rights in the Enlarged Group, a whitewash waiver from the requirement for Deltic to make a mandatory offer for Revolution under Rule 9 of the Code will be sought from the Panel on Takeovers and Mergers.

 

It is intended that the Enlarged Group will continue to be admitted to listing on the premium segment of the Official List of the UKLA and to trading on the London Stock Exchange plc's main market for listed securities. However, Deltic would welcome a discussion with shareholders to determine whether AiM would be a more suitable market.

Ranimul's major shareholders have indicated they would be prepared to enter into lock up arrangements not to dispose of any shares in the Enlarged Group for a period of 12 months from the date of the merger becoming effective.

 

Deltic has conducted its diligence on Revolution but recognises that Revolution has not yet commenced any reverse diligence on Deltic. It would expect completion of diligence to be rapid. Deltic would expect to commission and provide a reported on IFRS re-statement of its historic financial statements as necessary and adopt IFRS going forward as part of the Enlarged Group.

 

As a condition precedent to a merger, the Ranimul Loan will be refinanced with senior debt, at commercial rates of interest. In that regard, Deltic has received indicative terms from a major UK lender to provide this at LIBOR plus 2.5% as a packaged refinancing which would also include both Revolution's and Deltic's existing bank facilities.

 

Reservations

Nothing in this announcement should be taken as an indication of the price at which any cash offer would be made, if one were to be made.

On the basis that there has not been any substantive engagement by the Revolution board with Deltic on its Merger Proposal to date, and consequently no agreement has been reached on the terms of the Merger Proposal at the time of this announcement, the number of Revolution shares to be issued as consideration under the Merger Proposal, and the value of the Merger Proposal as implied by the merger ratio above, may be subject to change.

Pursuant to Rule 2.5 of the Code, Deltic reserves the right to set aside the financial terms referred to in this announcement and/or to vary the form and/or mix of the consideration referred to in this announcement, and/or at any time to make an offer or a merger proposal on less favourable terms, including in the following circumstances: 

1)   with the recommendation or consent of the board of Revolution;

 

2)   if Revolution announces, declares or pays any dividend or any other distribution to shareholders;

 

3)   if a third party (other than Stonegate) announces a firm intention to make an offer for Revolution; or

 

4)   if Revolution announces a whitewash proposal (for the purposes of Note 1 of the Notes on Dispensations from Rule 9 of the Code) or a reverse takeover.

 

Deltic strongly urges Revolution shareholders to vote against the Stonegate offer and to encourage Revolution's Board to progress Ranimul's Merger Proposal to allow it to be formally presented to, and voted on, by Revolution shareholders.

Enquiries

The Deltic Group Limited

Peter Marks, Chief Executive                                                     01908 544100
Bob Brannan, Chairman

Ranimul 1 Limited

Lawrence McGreal                                                                    01908 544100

Stifel Nicolaus Europe Ltd (Financial Advisor to Deltic)

Tim Medak                                                                               020 7710 7600
Robin Mann

Peter Lees
Anthony Ledeboer

Hudson Sandler (Public Relations Advisor to Deltic)

Nick Lyon                                                                                 020 7796 4133

Lucy Wollam

 

Information on Deltic

Deltic (http://delticgroup.co.uk/) is the leading specialist late-night operator in the UK. Since it was acquired by its current shareholders out of the administration of Luminar plc, its predecessor firm, in 2011, management has refurbished the majority of its estate of 57 clubs, including those operating under the PRYZM, Bar&Beyond, Steinbeck&Shaw, ATIK, and Fiction brands 

The highly experienced Deltic management team includes:

Bob Brannan,60,Chairman

Bob was appointed Chairman of Deltic in January 2014. He is an experienced Chairman and an ex-CEO with an outstanding record of value transformation in the consumer and leisure sector, most notably as Group Managing Director of Whyte & Mackay where he led the business to a tripling of its value over a two-and-a-half year period, selling it for £595 million in May 2007. Prior to that he was Group Managing Director of William Grant & Sons Distillers, one of the highest value private companies in the UK and before that was a management consultant with Coopers & Lybrand now PwC. He has chaired a variety of businesses that have achieved value growth including Vets Now, the UK's leading emergency vet and is also currently chair of Richard Irvin Ltd an engineering business and Duncan & Todd an independent optician retailer and manufacturer.

Peter Marks, 57, Chief Executive

Peter has over 35 years of experience in the late-night sector having held senior positions in Northern Leisure plc, Georgica plc, Luminar plc and Brook Leisure, a private late night leisure company.

 

He led the management team that acquired the trade and assets of Deltic from the administrators of Luminar Plc in December 2011 and was recognised as an Industry Icon at the ALMR awards in 2016.

Alex Millington, 39, Group Finance Director

Alex joined Deltic in 2013 as Head of Finance and was promoted to Group Finance Director in 2017. He played a significant role in the due diligence and integration of the Chicago businesses into Deltic in 2014.

 

He is a fellow of the ICAEW an alumni of KPMG and has held senior finance roles in both the manufacturing and leisure sectors.

 

IMPORTANT NOTICE

This announcement is not intended to, and does not, constitute, represent or form part of any offer, invitation or solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law or regulation and therefore any person who comes into possession of this announcement should inform themselves about, and comply with, such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws or regulations of any such relevant jurisdiction.

Stifel, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser and broker exclusively for Ranimul and Deltic and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than Deltic for providing the protections afforded to clients of Stifel, nor for providing advice in relation to any matter referred to herein.

No profit forecasts or estimates

Other than the Ranimul Profit Forecast and the Ranimul Long Term Profit Forecast, no statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per ordinary share, for Ranimul, Deltic or Revolution, respectively for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per ordinary share for Ranimul, Deltic or Revolution, respectively.

Quantified Financial Benefits Statement

Statements of estimated cost savings and synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the cost savings and synergies referred to in the Quantified Financial Benefits Statement may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated.

No statement in the Quantified Financial Benefits Statement, or this announcement generally (other than the Ranimul Profit Forecast and the Ranimul Long Term Profit Forecast), should be construed as a profit forecast or interpreted to mean that the Enlarged Group's earnings in the first full year following the merger, or in any subsequent period, would necessarily match or be greater than or be less than those of Revolution and/or Ranimul and/or Deltic for the relevant preceding financial period or any other period.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Disclosure Requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) of the Code applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8 of the Code. A Dealing Disclosure by a person to whom Rule 8.3(b) of the Code applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Code).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0) 20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website

In accordance with Rule 26.1 of the Code, a copy of this announcement will be available at www.delticgroup.co.uk by no later than 12 noon (London time) on 6 October 2017. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Forward looking statements

This announcement, including information included or incorporated by reference in this announcement, may contain certain "forward looking statements" regarding the financial position, business strategy or plans for future operations of Ranimul, Deltic and/or Revolution. All statements other than statements of historical fact included in any document may be forward looking statements. Forward looking statements also often use words such as "believe", "expect", "estimate", "hope", "will", "may", "should", "would", "could", "intend", "anticipate" and words of a similar meaning. Statements relating to reserves are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Ranimul, Deltic and/or Revolution's businesses and potential synergies resulting from the transaction; and (iii) the effects of government regulation on Ranimul, Deltic and/or Revolution's business. By their nature, forward looking statements involve risk and uncertainty that could cause actual results to differ materially from those suggested by them. They are also based upon assumptions. Much of the risk and uncertainty relates to factors that are beyond Ranimul, Deltic and/or Revolution's ability to control or estimate precisely, such as future market conditions and the behaviours of other market participants, and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. Neither the Deltic group nor any of their respective associates or directors, officers, employees, managers, agents, representatives, partners, members, consultants or advisers: (i) provide any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward looking statements will actually occur; nor (ii) assume any obligation to, nor intend to, revise or update these forward looking statements, except as required pursuant to applicable law.
 

Appendix 1: Ranimul Profit Forecast

 

Part A: Ranimul Profit Forecast and Ranimul Long Term Forecasts

 

Section 1: Ranimul Profit Forecast

 

This announcement contains forecasts of Adjusted EBITDA and Profit after Tax in respect of Ranimul for the financial year ended 24 February 2018, which constitutes a profit forecast for the purposes of Rule 28 of the Code (the "Ranimul Profit Forecast"). The Ranimul Profit Forecast is reproduced below:

 

 

February 2018
£ million

Adjusted EBITDA

Not lower than 14.1

Profit After Tax

Not lower than 2.7

 

Notes

 

"Adjusted EBITDA" is earnings before interest, tax, depreciation, amortisation, exceptional costs items (including launch costs for refurbished businesses and profit/loss on disposal) and transaction costs associated with the Merger Proposal.

 

"Profit after tax" is before transaction costs associated with the Merger Proposal.

Both Adjusted EBITDA and Profit After Tax for the financial period before transaction costs associated with the Merger Proposal are non-GAAP measures.

 

These Non‑GAAP financial measures are included in this announcement as they are used by management to monitor and report to the Board on Ranimul's trading performance and financial position. Ranimul believes that these measures enhance understanding of its underlying business performance. Certain non‑GAAP financial measures, such as EBITDA, are widely used by certain investors, securities analysts and other interested parties as supplemental measures of financial position, financial performance and liquidity.

However, these non‑GAAP financial measures are not measures based on UK GAAP or any other internationally accepted accounting principles, and shareholders should not consider such items as an alternative to the historical financial position or other indicators of Ranimul's cash flow and forward position based on UK GAAP measures. The Non‑GAAP financial measures, as defined herein, may not be comparable to similarly‑titled measures as presented by other companies due to differences in the way Ranimul's non‑GAAP financial measures are calculated. Even though the non‑GAAP financial measures will be used by Ranimul to assess its financial position and these types of measures are commonly used by investors, they have limitations as analytical tools, and shareholders should not consider them in isolation or as substitutes for analysis of the Ranimul's position or results as reported under UK GAAP.

Basis of preparation

 

The Ranimul Profit Forecast has been prepared on a basis consistent with Ranimul's accounting policies, which are in accordance with FRS102 and with the basis used to prepare the 2017 Consolidated Financial Statements and the 2016 Consolidated Financial Statements as well as with the basis on which Ranimul believes the Consolidated Financial Statements for the year ending 24 February 2018 will be prepared. Ranimul has also prepared the Ranimul Profit Forecast by reference to the Group's management accounts to 26 August 2017 and an internal management forecast to 24 February 2018.

 

The Ranimul Profit Forecast excludes any transaction costs applicable to the refinancing of the Ranimul Loan or any other costs or accounting impacts as a direct result of the Merger Proposal.

 

Principal assumptions

 

The principal assumptions on which the Ranimul Profit Forecast is based are as follows:

 

Factors outside the influence or control of the directors of Ranimul (or other members of management)

 

·     Rates of interest, taxation, inflation and foreign currency exchange rates will not change significantly during the forecast profit period.

·      Any changes in relevant legislation, governmental policy, licensing authorities' activities or other regulators requirements will not materially affect the results of the company.

·   There will be no material adverse change in economic conditions in the markets in which the company operates including as a result of terror attacks.

·    There will be no serious industrial disputes or other interruptions in business arising from circumstances outside the company's control which would adversely affect the company, its customers or suppliers.

·   There will be no abnormally adverse weather conditions, in particular in peak trading times, that will materially impact trade.

·      There will be no material changes to customer preferences for late night entertainment.

·     There will be no serious incidents at any of Deltic's key trading sites that will result in closure and/or loss of profit in those sites.

·   There will be no significant adverse impact from any competitor over and above the usual competitive landscape.

·     There will be no material change in property valuations or market conditions which could hinder Ranimul's ability to dispose of the Burnley freehold site as planned in February 2018 or other assets as necessary.

 

Factors within the influence or control of the directors of Ranimul (or other members of management)

 

·   There will be no material acquisitions or disposals by Deltic, other than those already included in the forecast, that will impact the results.

·   There will be no material change in the management or control of Deltic or to its existing operational strategy.

·   There will be no material change to sales mix, gross profit margins, entertainment cost, compensation structures or general / head office expenses of Deltic to those forecast by management.

·    There will be no adverse trading conditions or incidents that significantly adversely impact trading at key Deltic sites anticipated to drive growth within the forecast period.

·      Anticipated positive impact on forecast revenue from planned University "Freshers" promotional activities and Christmas bookings improvement year on year will be in line with management expectations.

·    The full year impact of Deltic's current year refurbishments will be in line with expectations and the recovery trends in certain businesses that suffered localised issues last year will continue.

·      Deltic will not receive any materially adverse rent reviews over and above management's expectations.

·    Retros and rebate agreements to which Deltic is a party will continue in accordance with the contracts in place and management will achieve the same proportion of cost of sales as rebates in the second half of the year as achieved in the first half.

·      The effective rate for tax will be in line with management's expectations.

·      There will be no material change to staff availability or to the flexibility of the work force.

·      Core trading during nights around Halloween and New Year's Eve will be in line with last year.

·      There will be no material or sustained interruption to electronic payment systems.

·      There will be no adverse litigation or claims crystallising in the period.

·     Expenditure in relation to the launch of new and refurbished sites will be in line with management's forecast spend.

Reports relating to the Ranimul Profit Forecast

 

As required by Rule 28.1(a) of the Code, KPMG (as reporting accountants to Ranimul in relation to the Ranimul Profit Forecast) has provided a report stating that, in their opinion, the Ranimul Profit Forecast has been properly compiled on the basis stated and that the basis of accounting used is consistent with Ranimul's accounting policies. In addition, Stifel (as financial adviser to Ranimul), has provided a report stating that, in its opinion, the Ranimul Profit Forecast has been prepared with due care and consideration.

 

Copies of these reports are included in Part B and Part C of Appendix 1 to this announcement. Each of KPMG and Stifel has given and not withdrawn its consent to the publication of its report in this announcement in the form and context in which it is included.

 

Responsibility for the Ranimul Profit Forecast

 

The Ranimul Profit Forecast (and the assumptions on which it is based including for capital expenditure and net debt) is the responsibility of Ranimul and its directors.

 

Section 2: Ranimul Long Term Forecasts

 

This announcement contains Adjusted EBITDA and Profit After Tax forecasts in respect of Ranimul for each of the financial years ended February 2019 to February 2021 inclusive (the "Ranimul Long Term Forecasts").

The Ranimul Long Term Forecasts constitute profit forecasts for the purposes of Rule 28 of the Code. In accordance with Rule 28.2 of the City Code, the Panel has granted Ranimul a dispensation from the requirement to include reports from reporting accountants and Ranimul's financial advisers in relation to the Ranimul Long Term Forecasts because they are for financial periods ending more than 15 months from the date of this announcement, which is the date on which they are first published.

 

The Ranimul Long Term Forecasts are reproduced below:

 

Ranimul is a private company. As such, in order for shareholders in Revolution to be able to appraise for themselves the impact of the Merger Proposal, Ranimul has set out below its forecast financial performance in each of the following financial years.

Key highlights are as follows:

 

February 2019

£ million

February 2020

£ million

February 2021

£ million

Revenue

108.4

114.5

124.7

Adjusted EBITDA

16.0

17.8

19.6

Profit After Tax

4.1

4.8

5.8

Maintenance capex

1.4

1.4

1.5

Refurbishment capex

6.5

4.8

4.0

Pipeline capex

2.0

4.0

6.0

Net debt

6.9

4.9

2.3

 

Notes

 

"Adjusted EBITDA" is earnings before interest, tax, depreciation, amortisation, exceptional costs items (including exceptional launch costs for refurbished businesses and profit/loss on disposal) and transaction costs associated with the Merger Proposal.

 

"Profit after tax" is before transaction costs associated with the Merger Proposal.

 

"Maintenance capex" is the capital spend required to simply maintain the plant, equipment, fixtures, fittings, leasehold and freehold estate. It does not include improvements to the estate.

 

"Refurbishment capex" is the capital spend invested by Ranimul under the refurbishment programmes. Such spend is forecast to yield a 40% ROI which is in line with management's experience of historic spend of this nature.

 

"Pipeline capex" is the capital spend that Ranimul intends to commit over the plan period to expanding the estate either organically through new-build sites or through strategic acquisition. Such spend is forecast to yield a 33% ROI which is in line with management's experience of historic spend of this nature.

 

Both Adjusted EBITDA and Profit After Tax for the financial period before transaction costs associated with the Merger Proposal are non-GAAP measures.

 

These Non‑GAAP financial measures are included in this document as they are used by management to monitor and report to the Board on Ranimul's trading performance and financial position. Ranimul believes that these measures enhance understanding of its underlying business performance. Certain non‑GAAP financial measures, such as EBITDA, are widely used by certain investors, securities analysts and other interested parties as supplemental measures of financial position, financial performance and liquidity.

However, these non‑GAAP financial measures are not measures based on UK GAAP or any other internationally accepted accounting principles, and shareholders should not consider such items as an alternative to the historical financial position or other indicators of Ranimul's cash flow and forward position based on UK GAAP measures. The Non‑GAAP financial measures, as defined herein, may not be comparable to similarly‑titled measures as presented by other companies due to differences in the way Ranimul's non‑GAAP financial measures are calculated. Even though the non‑GAAP financial measures will be used by Ranimul to assess its financial position and these types of measures are commonly used by investors, they have limitations as analytical tools, and shareholders should not consider them in isolation or as substitutes for analysis of the Ranimul's position or results as reported under UK GAAP.

Basis of preparation

 

The Ranimul Long Term Forecasts have been prepared on a basis consistent with Ranimul's accounting policies, which are in accordance with FRS102 and with the basis used to prepare the 2017 Consolidated Financial Statements and the 2016 Consolidated Financial Statements as well as with the basis on which Ranimul believes the Consolidated Financial Statements for the years ending 23 February 2019, 29 February 2020 and 27 February 2021 will each be prepared. Ranimul has also prepared the Ranimul Long Term Forecasts by reference to internal management forecasts for the same periods.

 

The Ranimul Long Term Forecasts excludes any transaction costs incurred as a direct result of the Merger Proposal, the refinancing of the Ranimul Loan or any other accounting impacts as a direct result of the Merger Proposal.

 

Principal assumptions

 

The principal assumptions on which the Ranimul Long Term Forecasts are based are as follows:

 

Factors outside the influence or control of the directors of Ranimul (or other members of management)

 

·     Rates of interest, taxation, inflation and foreign currency exchange rates will not change significantly during the forecast profit period.

·      Any changes in relevant legislation, governmental policy, licensing authorities' activities or other regulators requirements will not materially affect the results of the company.

·    There will be no material adverse change in economic conditions in the markets in which the company operates including as a result of terror attacks.

·    There will be no serious industrial disputes or other interruptions in business arising from circumstances outside the company's control which would adversely affect the company, its customers or suppliers.

·   There will be no abnormally adverse weather conditions , in particular in peak trading times, that will materially impact trade.

·      There will be no material changes to customer preferences for late night entertainment.

·     There will be no serious incidents at any of Deltic's key trading sites that will result in closure and/or loss of profit in those sites.

·    There will be no significant adverse impact from any competitor over and above the usual competitive landscape

·     There will be no material change in property valuations or market conditions which could hinder Ranimul's ability to dispose of assets as necessary.

 

Factors within the influence or control of the directors of Ranimul (or other members of management)

 

·   There will be no material acquisitions or disposals by Deltic, other than those already included in the forecast, that will impact the results.

·   There will be no material change in the management or control of Deltic or to its existing operational strategy.

·   There will be no material change to sales mix, gross profit margins, entertainment cost, compensation structures or general / head office expenses of Deltic to those forecast by management.

·    There will be no adverse trading conditions or incidents that significantly adversely impact trading at key Deltic sites anticipated to drive growth within the forecast period.

·     Anticipated positive impact on forecast revenue from planned University "Freshers" promotional activities and Christmas bookings improvement year on year will be in line with management expectations.

·      Deltic will not receive any materially adverse rent reviews over and above management's expectations.

·    Retros and rebate agreements to which Deltic is a party will continue in accordance with the contracts in place and management will achieve the same proportion of cost of sales as rebates in the second half of the year as achieved in the first half.

·      The effective rate for tax will be in line with management's expectations.

·      There will be no material change to staff availability or to the flexibility of the work force.

·      There will be no material or sustained interruption to electronic payment systems.

·      There will be no adverse litigation or claims crystallising in the period.

·     Expenditure in relation to the launch of new and refurbished sites will be in line with management's forecast spend.

Responsibility for the Ranimul Long Term Profit Forecast

 

The Ranimul Long Term Profit Forecasts (and the assumptions on which they are based) are the responsibility of Ranimul and its directors.

 

Ranimul Directors' Confirmation

 

The directors of Ranimul confirm that the Ranimul Long Term Forecasts have been properly compiled on the basis of the assumptions stated above and that the basis of accounting used is consistent with Ranimul's accounting policies.
 

Part B: Report by KPMG on the Ranimul Profit Forecast

The Directors

Ranimul 1 Limited

Aurora House

Deltic Avenue

Rooksley

Buckinghamshire

MK13 8LW

 

Stifel Nicolaus Europe Limited

150 Cheapside

London

EC2V 6ET

 

 

5 October 2017

Ladies and Gentlemen

Ranimul 1 Limited (the 'Company')

We report on the profit forecast comprising the forecast of Adjusted EBITDA and Profit After Tax (both as defined in Appendix 1, Part A, Section 1 of the announcement issued by the Company dated 5 October 2017 ('the Announcement')) of the Company and its subsidiaries ('the Group') for the year ending 24 February 2018 (the 'Ranimul Profit Forecast'). The Ranimul Profit Forecast, and the material assumptions upon which it is based, are set out in Section 1 of Part A of Appendix 1 of the Announcement. This report is required by Rule 28.1 of The City Code on Takeovers and Mergers ('the City Code') and is given for the purpose of complying with that rule and for no other purpose.

Responsibilities

It is the responsibility of the directors of the Company ('the Directors') to prepare the Ranimul Profit Forecast in accordance with the requirements of the City Code.

It is our responsibility to form an opinion as required by the City Code as to the proper compilation of the Ranimul Profit Forecast and to report that opinion to you. 

Save for any responsibility which we may have to those persons to whom this report is expressly addressed, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 23.2 of the City Code, consenting to its inclusion in the Announcement.

Basis of Preparation of the Ranimul Profit Forecast

The Ranimul Profit Forecast has been prepared on the basis stated in Section 1 of Part A of Appendix 1 of the Announcement and is based on the unaudited management accounts for the six months ended 26 August 2017 and a forecast to 24 February 2018. The Ranimul Profit Forecast is required to be presented on a basis consistent with the accounting policies of the Group.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included evaluating the basis on which the historical financial information included in the Ranimul Profit Forecast has been prepared and considering whether the Ranimul Profit Forecast has been accurately computed based upon the disclosed assumptions and the accounting policies of the Group. Whilst the assumptions upon which the Ranimul Profit Forecast are based are solely the responsibility of the Directors, we considered whether anything came to our attention to indicate that any of the assumptions adopted by the Directors which, in our opinion, are necessary for a proper understanding of the Ranimul Profit Forecast have not been disclosed or if any material assumption made by the Directors appears to us to be unrealistic.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Ranimul Profit Forecast has been properly compiled on the basis stated.

Since the Ranimul Profit Forecast and the assumptions on which it is based relate to the future and may therefore be affected by unforeseen events, we can express no opinion as to whether the actual results reported will correspond to those shown in the Ranimul Profit Forecast and differences may be material.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion the Ranimul Profit Forecast has been properly compiled on the basis stated and the basis of accounting used is consistent with the accounting policies of the Group.

Yours faithfully

 

KPMG LLP

 

 

Part C - Report by Stifel Nicolaus Europe Limited

The Directors

Ranimul 1 Limited

Aurora House

Deltic Avenue

Rooksley

Buckinghamshire

MK13 8LW

 

5 October, 2017

Dear Sirs,

 

Report on profit forecast by Ranimul 1 Limited

 

We refer to the profit forecast of Ranimul 1 Ltd ("Ranimul" or the "Company") announced on 5 October 2017 (the "Ranimul Profit Forecast").

 

We have discussed the Ranimul Profit Forecast, together with the bases and assumptions on which it has been prepared with the Directors of Ranimul ("Directors") and with KPMG LLP, the Company's reporting accountants. Ranimul have confirmed to us that all information relevant to the Ranimul Profit Forecast has been disclosed to us.

We have also discussed the accounting policies and basis of calculation adopted in arriving at the Ranimul Profit Forecast with the Directors and KPMG LLP ("KPMG"), and we have considered the report on the Ranimul Profit Forecast prepared by KPMG LLP dated 5 October 2017 addressed to yourselves and ourselves on this matter.

 

We have relied upon the accuracy and completeness of all of the financial and other information discussed with us, whether during the meetings with either KPMG or KPMG and the Company's senior management or as otherwise presented to us, and have assumed such accuracy and completeness for the purposes of providing this letter. You have confirmed to us that all information relevant to the Ranimul Profit Forecast has been disclosed to us.

 

We also note that the Directors have acknowledged and confirmed that the Ranimul Profit Forecast was prepared after due and careful consideration, the financial statements were made in a manner consistent with the Company's reporting standards and the assumptions were reasonable. The Board also acknowledged and confirmed that it has reviewed the Ranimul Profit Forecast, and that it is solely responsible for the Ranimul Profit Forecast and the assumptions on which it is based.

 

On the basis of all of the foregoing, we consider that the Ranimul Profit Forecast, for which you in your capacity as Directors of Ranimul are solely responsible, for the purposes of the City Code on Takeovers and Mergers, has been prepared with due care and consideration.

 

This letter is provided to you solely in connection with Rule 28.3(b) of the City Code on Takeovers and Mergers and for no other purpose. Accordingly, save for any responsibility which we may have to those persons to whom this letter is expressly addressed, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, or in connection with this letter.

 

Yours faithfully, 

 

Stifel Nicolaus Europe Limited
 

Appendix 2: Quantified Financial Benefits Statement

 

Part A: Quantified Financial Benefits Statement

 

This announcement contains a statement of the estimated cost synergies arising from the Merger Proposal (the "Quantified Financial Benefits Statement"). The Quantified Financial Benefits Statement is reproduced below:

 

Ranimul expects that the Merger Proposal would generate synergies that could not be achieved independently of the Merger Proposal and which will lead to substantial value creation for all shareholders. Ranimul expects that the Merger Proposal will result in currently identified recurring annual pre-tax cost savings of approximately £6.8 million, fully realised by the end of the second full year (year ending 30 June 2020) following completion of a merger. The expected sources of the identified cost synergies are as follows:

 

·     Headcount reductions: Approximately 45% of the identified synergies are expected to be generated from headcount rationalisation, in areas where Deltic has identified an overlap exists, or where the operational management structure that Deltic plans to employ allows other headcount reductions.

 

·   Rationalisation of central costs: Approximately 20% of the identified synergies are expected to be generated from the rationalisation of certain central costs. Deltic has reviewed the cost base of Revolution and believes that savings could be made in the following areas:

 

-    Removal of overlap in the use of external design and marketing agencies

-    Merging the IT, Business and EPOS systems and contracts of the two businesses

-    Removal of overlap in areas such as professional and recruitment fees

 

·    Procurement and supply savings: Approximately 30% of the identified synergies are expected to be generated from benefits to the Enlarged Group in the purchasing of drinks, food and other areas, through the sharing of best practices and increased buying scale.

 

·      Other savings: The remaining savings (approximately 5%) are delivered through efficiencies of larger scale in operational process and from Deltic's view of specific areas where cost savings can be delivered through Deltic's own experienced cost-mitigation activities in such areas.

The board of Ranimul expects it would deliver these synergies progressively, expecting to realise approximately 10% in the year to 30 June 2018, 80% in the year to 30 June 2019 and 100% in the year to 30 June 2020 (assuming, for these purposes, that completion of the merger occurs by 31 December 2017).

 

In addition to the cost synergies described above, the Ranimul Loan would be refinanced as a condition precedent to the transaction. The impact of this refinancing would result in an improvement in net earnings before tax of an additional (approximately) £0.9 million in the year ending June 2019.

 

The synergies created by a refinancing of the Ranimul Loan are assessed based on a refinanced loan cost of LIBOR plus a 2.5% margin, assuming LIBOR at 0.5%, with the loan assumed to have a 10 year amortisation profile. Over time, as EBITDA to senior debt leverage is planned to reduce, Deltic anticipates the 2.5% margin will similarly decline. Given the nature of the saving, Deltic expects the full saving of approximately £0.9 million to be achieved in the first full year following the completion of a merger.

 

It is expected that the realisation of the identified synergies would result in one-off restructuring and integration costs (excluding any costs associated with the refinancing of the Ranimul Shareholder Loan) of approximately £3 million, the majority of which it is anticipated would be incurred by the end of the second year following completion of a merger. Aside from these integration costs, the directors of Ranimul do not expect any material dis-benefits to arise in connection with the Merger Proposal. The expected synergies are expected to accrue as a direct result of the Merger Proposal and could not be achieved independently of the Merger Proposal.

 

The cost synergies set out above have been developed without direct involvement from Revolution therefore it is anticipated that this number might vary with engagement.

 

Further information on the bases of belief supporting the Quantified Financial Benefits Statement, including the principal assumptions and sources of information, is set out below.

 

Bases of belief

 

In preparing the Quantified Financial Benefits Statement, a synergy working group comprising senior operational and financial personnel from Deltic was established to evaluate and assess the potential synergies available from the Merger Proposal. The synergies working group has worked collaboratively, alongside external advisers, to identify and quantify potential synergies as well as estimate any associated costs based on publicly available sources of information and information made available to Deltic during the due diligence process. In circumstances where data has been limited for commercial or other reasons, Ranimul has made estimates and assumptions to aid the development of individual synergy initiatives.

 

The assessment and quantification of the potential synergies has been informed by Deltic managements' significant experience in the industry.

 

The cost bases for Ranimul for the basis of the Quantified Financial Benefits Statement are those contained in Ranimul's 2017 Annual Report and Accounts and also its un-audited management accounts for the six months ending 26 August 2017. The cost bases for Revolution applied for the purpose of compiling the Quantified Financial Benefits Statement are those contained in Revolution's 2017 Annual Report and Accounts and also detailed management information made available to Deltic through the financial due diligence process, including Revolution's operating forecast for the year ending 30 June 2018.

 

In arriving at the estimate of synergies set out in this announcement, the directors of Ranimul have made the following principal assumptions:

 

Assumptions within the influence or control of the directors of Ranimul (or other members of management)

 

·    The combined business would be run by the Deltic executive management team from the current Deltic Head Office in Milton Keynes

 

·      Revolution will maintain its premium listing on the Main Market of the London Stock Exchange.

 

Assumptions outside the influence or control of the directors of Ranimul (or other members of management)

 

·      There will be no material impact on the underlying operations of either company or their ability to continue to conduct their businesses, as a consequence of the Merger Proposal.

 

·      The business is not subject to unforeseen integration costs, in particular with regard to the integration of IT systems.

 

·   There are no requirements imposed by licensing or other regulatory authorities relating to the Merger Proposal which are unusual in the context of the transaction.

 

·     There will be no material change in macroeconomic, political, legal, licensing or regulatory conditions in the markets and regions in which Ranimul, Deltic and Revolution operate.

 

·  There is no information which would be material to Ranimul's assessment of the integration of the businesses which is in the possession of Revolution but has not been disclosed to Ranimul.

 

·   Any headcount reductions do not give rise to costs which would be outside of Ranimul's reasonable expectations.

 

Reports

 

As required by Rule 28.1(a) of the Code, Deloitte LLP (as reporting accountants to Ranimul for the purpose of the Quantified Financial Benefits Statement) has provided a report stating that, in its opinion, the Quantified Financial Benefits Statement has been properly compiled on the basis stated. In addition, Stifel (as financial adviser to Ranimul) has provided a report stating that, in its opinion, the Quantified Financial Benefits Statement has been prepared with due care and consideration.

 

Copies of these reports are included in Part B and Part C of Appendix 2 to this announcement. Each of Deloitte LLP and Stifel has given and not withdrawn its consent to the publication of its report in this announcement in the form and context in which it is included.

 

Responsibility for the Quantified Financial Benefits Statement

 

The Quantified Financial Benefits Statement (and the assumptions on which it is based) is the responsibility of Ranimul and its directors.

 

Notes

 

The statements of estimated cost savings and synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. Further, in considering and reviewing the estimated cost savings and synergies, the directors of Ranimul have used only publicly available sources of information relating to Revolution and due diligence information provided by Revolution. As a result, the cost savings and synergies referred to may not be achieved, or may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated.

 

No statement (other than the Ranimul Profit Forecast and the Ranimul Long Term Forecasts) should be construed as a profit forecast or interpreted to mean that the Enlarged Group's earnings in the first full year following a merger, or in any subsequent period, would necessarily match or be greater than or be less than those of Ranimul and/or Deltic and/or Revolution for the relevant preceding financial period or any other period.

 

The implementation structure remains to be finally determined by Ranimul. However it is not expected that such synergy estimates will be materially affected by the final transaction structure.
 

Part B: Report by Deloitte LLP on the Quantified Financial Benefits Statement

 

The Board of Directors

On behalf of Ranimul 1 Limited

Aurora House

Deltic Avenue

Rooksley

Buckinghamshire

MK13 8LW

 

Stifel Nicolaus Europe Limited

150 Cheapside

London

EC2V 6ET

 

5 October, 2017

Dear Sirs

 

Merger proposal by Ranimul 1 Limited (the "Offeror") relating to Revolution Bars Group plc (the "Target")

 

We report on the statement made by the directors of the Offeror (the "Directors") of estimated synergy benefits set out in Part A of Appendix 2 to this announcement (the "Announcement") issued by the Offeror ("the Quantified Financial Benefits Statement" or "the Statement") dated 5 October 2017. The Statement has been made in the context of the disclosures within Part A of Appendix 2, setting out, inter alia, the basis of the Directors' belief (identifying the principal assumptions and sources of information) supporting the Statement and their analysis, explanation and quantification of the constituent elements.

 

Responsibilities

 

It is the responsibility of the Directors to prepare the Statement in accordance with Rule 28 of the City Code on Takeovers and Mergers (the "Takeover Code").

 

It is our responsibility to form our opinion, as required by Rule 28.1(a) of the Takeover Code, as to whether the Statement has been properly compiled on the basis stated and to report that opinion to you.

 

This report is given solely for the purposes of complying with Rule 28.1(a)(i) of the Takeover Code and for no other purpose. Therefore, to the fullest extent permitted by law we do not assume any other responsibility to any person for any loss suffered by any such person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 23.2 of the Takeover Code, consenting to its inclusion in the Announcement.

 

Basis of opinion

 

We conducted our work in accordance with the Standards for Investment Reporting  issued by the Auditing Practices Board in the United Kingdom.

 

Our work included considering whether the Statement has been accurately computed based upon the disclosed bases of belief (including the principal assumptions). Whilst the bases of belief (and the principal assumptions) upon which the Statement is based are solely the responsibility of the Directors, we considered whether anything came to our attention to indicate that any of the bases of belief (or principal assumptions) adopted by the Directors which, in our opinion, are necessary for a proper understanding of the Statement have not been disclosed or if any basis of belief (or principal assumption) made by the Directors appears to us to be unrealistic. Our work did not involve any independent examination of any of the financial or other information underlying the Statement.

 

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Quantified Financial Benefits Statement has been properly compiled on the basis stated.

 

Since the Statement (and the principal assumptions on which it is based) relates to the future, the actual synergy benefits achieved are likely to be different from those anticipated in the Statement and the differences may be material. Accordingly, we can express no opinion as to the achievability of the synergy benefits identified by the Directors in the Statement.

 

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in jurisdictions outside the United Kingdom, including the United States of America, and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices. We have not consented to the inclusion of this report and our opinion in any registration statement filed with the SEC under the US Securities Act of 1933 (either directly or by incorporation by reference) or in any offering document enabling an offering of securities in the United States (whether under Rule 144A or otherwise). We therefore accept no responsibility to, and deny any liability to, any person using this report and opinion in connection with any offering of securities inside the United States of America or who makes a claim on the basis they had acted in reliance on the protections afforded by United States of America law and regulation.

 

Opinion

 

In our opinion, based on the foregoing, the Quantified Financial Benefits Statement has been properly compiled on the basis stated.

 

Yours faithfully

 

Deloitte LLP

 

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom.  Deloitte LLP is the United Kingdom affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NWE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.
 

Part C: Report by Stifel on the Quantified Financial Benefits Statement

The Directors

Ranimul 1 Limited

Aurora House

Deltic Avenue

Rooksley

Buckinghamshire

MK13 8LW

 

 

 5 October, 2017

Dear Sirs,

 

Quantified Financial Benefits Statement by Ranimul 1 Limited 

 

We refer to the Quantified Financial Benefits Statement, the bases of belief thereof and the notes thereto (together, the "Statement") as set out in Part A of Appendix 2 of this announcement dated 5 October 2017, for which the Board of Directors of Ranimul (collectively the "Directors") are solely responsible under Rule 28 of the City Code on Takeovers and Mergers (the "Code"). 

 

We have discussed the Statement (including the assumptions and sources of information referred to therein), with the Directors and those officers and employees of Ranimul who developed the underlying plans. The Statement is subject to uncertainty as described in this announcement and our work did not involve an independent examination of any of the financial or other information underlying the Statement.

 

We have relied upon the accuracy and completeness of all the financial and other information provided to us by or on behalf of Ranimul, or otherwise discussed with or reviewed by us, and we have assumed such accuracy and completeness for the purposes of providing this letter. 

 

We do not express any view as to the achievability of the quantified financial benefits identified by the Directors. 

 

We have also reviewed the work carried out by Deloitte LLP and have discussed with them the opinion set out in Part B of Appendix 2 of this announcement addressed to yourselves and ourselves on this matter. 

 

On the basis of the foregoing, we consider that the Statement, for which you as the Directors are solely responsible, has been prepared with due care and consideration. 

 

This letter is provided to you solely in connection with Rule 28.1(a)(ii) of the Code and for no other purpose. We accept no responsibility to Ranimul or their shareholders or any person other than the Directors in respect of the contents of this letter; no person other than the Directors can rely on the contents of this letter, and to the fullest extent permitted by law, we exclude all liability (whether in contract, tort or otherwise) to any other person, in respect of this letter, its contents or the work undertaken in connection with this letter or any of the results that can be derived from this letter or any written or oral information provided in connection with this letter, and any such liability is expressly disclaimed except to the extent that such liability cannot be excluded by law.

 

Yours faithfully, 

 

Stifel Nicolaus Europe Limited
 

Appendix 3: Analyst Consensus Forecasts

 

Reference is made in this announcement to investment analysts' consensus forecasts relating to Revolution in respect of the periods ending 30 June 2018, 30 June 2019 and 30 June 2020. Since Revolution has not published on its website any such consensus forecasts, Deltic has compiled such consensus forecasts in accordance with the requirements of Rule 28.7 and Rule 28.8 of the Code. Such consensus forecasts have been made without the agreement or approval of Revolution. The consensus forecasts are not endorsed by either Revolution or Deltic and they have not been reviewed or reported on in accordance with the requirements of Rule 28.1(a) of the Code. As such, caution should be exercised in considering the consensus forecasts and no undue reliance should be placed on such forecasts.

The consensus forecasts have been compiled only from the forecasts of those investment analysts who have (to Deltic's knowledge) published such forecasts since the publication of Revolution's preliminary statement of annual results on 3 October 2017 and, as required under Rule 28.7(a) of the Code, exclude any forecasts: (i) which pre-date such results; and (ii) published by Numis, which is a connected adviser to Revolution. The investment analysts whose forecasts have been included in the calculation of the consensus forecasts for the periods ending 30 June 2018 and 30 June 2019 are Peel Hunt LLP (report dated 3 October 2017), finnCap (report dated 3 October 2017) and Canaccord Genuity Limited ("Canaccord") (report dated 3 October 2017). The investment analysts whose forecasts have been included in the calculation of the consensus forecasts for the periods ending 30 June 2020 are Peel Hunt LLP (report dated 3 October 2017) and Canaccord (report dated 3 October 2017). No investment analyst's forecast has been excluded from the consensus forecasts (other than the forecast published by Numis (for the reasons set out above) and, in respect of EBITDA only, Canaccord (for the reasons set out in Note 1 to the table below)). No further updates will be published in relation to any further investment analysts' forecasts published after the date of this announcement but before 10 October 2017.

Consensus forecasts

Y/E June

2018E

2019E

2020E

Data

Lowest

Highest

Arithmetic mean

Lowest

Highest

Arithmetic mean

Lowest

Highest

Arithmetic mean

Sales (£m)

146.0

146.3

146.3

157.7

162.5

160.3

170.8

179.6

 

175.2

EBITDA (£m)(1)

17.1

17.7

17.4

18.9

19.3

19.1

Only one forecast available

Only one forecast available

20.2

Adjusted PBT (£m)

9.5

11.0

10.4

10.3

11.8

11.2

12.1

12.4

12.3

Adj EPS (p)(2)

14.5

17.5

16.1

15.8

18.4

17.3

18.8

19.4

19.1

 

Notes

(1) The forecasts prepared by investment analysts at Canaccord have not been used in the calculation of the consensus forecasts for EBITDA because Canaccord do not prepare 'Adjusted EBITA' and consequently the EBITDA forecasts prepared are not comparable to the forecasts prepared by Peel Hunt and Finncap which are 'Adjusted EBITDA' forecasts.

(2) The issued share capital of Revolution is 50 million shares.
 

Appendix 4: Sources and Bases

 

Unless otherwise stated, financial and other information concerning Deltic, and Revolution has been extracted from publicly available sources or from Deltic management sources (in respect of information relating to Deltic) and the diligence exercise conducted on Revolution as a part of this process. 

The Merger Proposal is based on the following assumptions: 

 

1)   the number of Revolution ordinary shares in issue as at and upon completion of the Merger Proposal is 50 million. The proposed merger ratio assumes there is no increase in the share capital of Revolution or grant of share awards or other rights over shares up to and upon completion of the Merger Proposal, and the ratio may be amended if there are any such increases or grants.

 

2)   there will be no dividend or other capital returns declared, payable or paid by Revolution following the date of this announcement other than any announced dividends.

 

The historical financial information relating to Ranimul is extracted from the audited consolidated financial statements of Ranimul which are prepared in accordance with FRS102.

 

 

 

 


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