Shares in London Cocktail Clubs operator Nightcap (NIGHT:AIM) backed by Dragon’s Den star Sarah Willingham, fell 13.5% to 29p after announcing a deeply discounted share placing at 21p.

The sale of 11.9 million new shares, potentially raising £4 million will be used to acquire The Adventure Bar Group. The placing represents a 37.5% discount to the prior closing price of 33.5p.

The acquisition price consists of an initial £1 million and up to £1.5 million of deferred consideration, all satisfied by new shares.

The proposed acquisition will add nine bars to the group including seven established themed bars in popular London locations, a large outdoor bar, food and entertainment venue in Birmingham, a bar site in Birmingham opening on 17 May and a 50% interest in a central London roof top bar.

GROWTH POTENTIAL

The board believes that the cocktail oriented brands purchased, including ‘Tonight Josephine’, ‘Bar Elba’, ‘Luna Springs’ and ‘Blame Gloria’ have significant potential for national expansion of up to 40 sites.

The board also said there were opportunities to extract purchasing synergies across major alcohol lines with the company’s existing London Cocktail club family of bars.

Chief executive Willingham, who appeared on the fourteenth series of Dragons Den commented that ‘the further expansion of Adventure Bar Group will take place during a time where the opportunity to acquire first class property at attractive rates is unmatched by anything I have seen during my 25 years in hospitality’.

Founders and senior management of The Adventure Bar Group will stay onboard following the sale.

The vendors will initially receive 4,761,905 new Ordinary shares at 21p as initial consideration and up to 7,142,856 new Ordinary Shares as deferred consideration, dependent on the business meeting performance criteria.

Part of the £4 million raised will be used to repay debt which the company will assume in making the acquisition.

CURRENT TRADING

Five of Nightcap’s bars which have outdoor seating opened on 12 April and were said to be trading well and in line management’s expectations.

The board remained ‘encouraged’ by the level of bookings for the post 17 May period and was currently in negotiations in respect of opening additional London Cocktail Club sites.

At 30 April the group had unaudited cash balances of £3.5 million and total borrowings of around £1.5 million.

Prior to the pandemic the target bars achieved annual revenues of £11.9 million and adjusted EBITDA (earnings before taxes, depreciation, and amortisation) of £1.3 million.

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Issue Date: 04 May 2021