Deltic, the UK’s largest nightclub operator, was bought by the Scandinavian nightlife group Rekom for just £10m, roughly an eighth of its pre-pandemic value after it came close to running out of cash as a result of the coronavirus crisis.
According to an administrator’s report published on Thursday, Deltic had £896,400 in cash but faced rent and tax arrears of £17m and was burning through about £1m a month with all of its 52 sites closed.
Rekom was one of four bidders for the company, which included the private equity group Greybull, the bar operator Shoreditch Bar Group and Deltic’s existing shareholders. The takeover was confirmed in December.
Peter Marks, Deltic’s chief executive, said it had been a “crazy situation where we had a business that was worth £80m that was sold for £10m”.
The business, which operates popular student clubs such as Pryzm and Atik, put itself up for sale in October after missing out on the majority of government support packages available during the pandemic due to its size and balance sheet.
The nightclub sector and licensed sexual entertainment venues are the only two industries that have been permanently closed under government mandate since lockdowns were imposed in March.
Due to the restrictions Deltic had only been able to reopen 10 per cent of its total floor space, which it ran as bars rather than nightclubs. It had already cut 1,000 jobs before going into administration.
Rekom, which operates 137 sites across Denmark, Finland and Norway, has agreed to take on 42 of Deltic’s nightclubs and the majority of its 1,466 employees, with 155 now facing redundancy due to the closure of 10 sites.
As well as paying £10m for Deltic, it will also have to fund losses of about £700,000 a month while nightclubs are closed.
Adam Falbert, Rekom’s chief executive, said at the time of the sale that the company had been “looking at the UK market for the past few years as part of our ambition to become one of the largest pan-European nightlife groups”.
“When the opportunity came to take over a strong and well-run group like Deltic, it was a question of finding the right set-up to make it happen,” he added.
Mr Marks said that after the integration with Rekom, the group would start looking at expanding through acquisitions thanks to the financial backing of Rekom’s majority shareholder, the Danish private equity firm Catacap.
Before the pandemic, Deltic had been undergoing a strategic overhaul after its new drinking, dining and club brand Eden failed to gain traction with customers.
According to the most recent accounts available, for the year ending February 2019, underlying earnings before interest, tax, depreciation and amortisation declined roughly 30 per cent to £11.1m on turnover of £101.8m.
Deltic’s administration was overseen by the consultancy group BDO who took fees of £275,000.