Loungers PLC, Re

The court sanctioned a modified scheme of arrangement under Part 26 of the Companies Act 2006 by which CF Exedra Bidco Limited (Bidco) will acquire the issued and to be issued ordinary share capital of Loungers plc. The judge found that the statutory and procedural requirements for a Part 26 scheme had been satisfied, that the class was fairly represented at the Court Meeting and that the statutory majorities had approved the Scheme. The court applied the ordinary discretion exercise (including the four matters in Re TDG plc) and concluded there was no blot on the Scheme, the directors had unanimously recommended the offers after receiving financial advice, and the consideration (revised from 310p to 325p per share) represented a significant premium to the undisturbed share price. The court waived a purely technical defect as to the place specified for the Court Meeting, accepted undertakings from Bidco, and noted that irrevocable undertakings did not raise a class issue in the circumstances.

The application was a first-instance sanction hearing under Part 26 CA 2006 seeking approval of a scheme of arrangement by which Bidco (a vehicle formed for the acquisition and ultimately owned by affiliates of Fortress) would acquire Loungers plc's ordinary shares. The Scheme provided for cash consideration (initially 310 pence per share, increased to 325 pence per share on 15 January 2025) with a non-cash rollover alternative. The directors unanimously recommended the offers and the Scheme document contained the explanatory statement required by Part 26.

Nature of the application: sanction of a modified scheme of arrangement under Part 26 CA 2006 to effect a takeover acquisition.

Procedural and factual background: permission to convene a single physical Court Meeting was granted by ICC Judge Mullen; the Court Meeting was held (practically in Bristol) and the requisite statutory majorities in number and value approved the Scheme. Witness statements from the registrars and printers confirmed distribution and notice requirements had been met. Bidco provided irrevocable undertakings for a material proportion of shares and offered undertakings to be bound by the Scheme.

Issues framed by the court:

• whether the statutory requirements and notices under Part 26 had been complied with;
• whether the class was fairly represented and the statutory majority acted bona fide;
• whether a reasonable shareholder might approve the Scheme;
• whether there was any blot on the Scheme to warrant refusal of sanction;
• whether technical defects (the place specified for the meeting) or the existence of irrevocable undertakings raised material concerns;
• whether outstanding conditions had been satisfied or waived and whether appropriate undertakings had been given.

Court’s reasoning and conclusions: the court was satisfied that the statutory provisions and notice requirements had been complied with, the class was fairly represented and the statutory majority had acted bona fide. Applying the guidance set out in Re TDG plc and authorities on voting treatment, the court concluded an intelligent and honest shareholder might reasonably approve the Scheme given the directors' unanimous recommendation, the financial adviser’s involvement, the clear explanatory documentation and the premium offered. The court found no blot on the Scheme, held that irrevocable undertakings in the circumstances did not cause a class issue, accepted the undertakings given by Bidco and waived the minor technical defect as to the specified meeting location. The hearing concluded with the court sanctioning the Scheme.

The court sanctioned the Scheme. The judge concluded that the requirements of Part 26 CA 2006 had been met, the class was fairly represented and the statutory majorities had acted bona fide, an intelligent and honest member might reasonably approve the Scheme, there was no blot on the Scheme, and remaining conditions had been satisfied or waived. The court accepted undertakings from Bidco and waived a technical defect as to the place specified for the Court Meeting.