Revolution warns of insolvency risk after rejecting 'undeliverable' rescue deal

Struggling late night bar and gastro pub group Revolution has rejected a rescue approach from rival Nightcap and warned that it faces a cash crunch within months.

It said that the offer from Nightcap was unworkable, given the time constraints, costs and legal, procedural and execution issues involved.

Revolution said that absent any better offers, the best option to save the business is for shareholders to back its upcoming £12.5million emergency fund raising and cost cutting plan.

“Following legal advice, the Board has concluded that the Nightcap Proposal is incapable of being delivered,” said Revolution in a statement. “There were a number of challenges to the delivery of the Nightcap Proposal, which was highly conditional.”

So far, investors accounting for nearly 30 percent of Revolution’s shares have promised to back its fund raising.

It warned unless more do so, then all of its shareholders face being wiped out.

It said it faces “liquidity pressures” from July, and without fresh finance, it is likely to have to go into an “insolvency process” and sell off its businesses.

“If the fundraising is not approved, the Board believe that Shareholders are highly likely to lose all of their investment,” it said.

Revolution has struggled to cope since the pandemic led to the cost-of-living crisis and weak economy, which has hammered younger people, its core demographic.

Dan Coatsworth, investment analyst at AJ Bell, said that even if it finds a white knight or its emergency fund raising deal comes through, it still has to adapt to a world where fewer young people go out for late night entertainment and socialising.

“The bigger issues, throbbing away in the background like an insistent beat, are the rising costs and waning demand faced by this end of the hospitality sector,” he said. “Fewer younger people are in the habit of going out drinking on a regular basis, meaning late-night operators need to come up with new ways to keep people frequenting their outlets.”

Revolution has 58 of its eponymous bars and Revoluciou de Cuba sites around the country, as well as the 22 pubs in its Peach Pubs business.