Luminar's £360m Northern takeover creates a club giant

Luminar, The clubs and restaurants operator, yesterday agreed a £360m takeover of Northern Leisure, its bigger rival, in a deal which will give the enlarged group a 10 per cent share of the UK market and 600,000 customers a week.

The merged company will have a market value of about £585m and will own 237 venues, including Luminar's Hippodrome in the West End of London and Northern's Jumpin' Jaks themed bars.

But despite the scale of the transaction and endorsements from analysts who said the deal "makes sense", Luminar shares closed down 95p at 675p on concerns about a lack of information on goodwill and restructuring costs. Some investors believed that Luminar overpaid, while others were worried about increasing their exposure to the clubs sector ahead of reforms allowing pubs to extend opening hours. Northern ended down 1.5p at 159p.

As indicated by Luminar last Thursday, Northern shareholders will receive one Luminar share for every four shares held, as well as a special dividend of 4.5p, valuing the larger company at about 197p a share based on Tuesday's closing price. Stephen Thomas, Luminar's chief executive will head the new group said: "We don't have any competition now. We're in a marketplace of one."

Mr Thomas said the deal would create savings and synergies in everything from bulk-buying of glasses to streamlining administrative functions. He declined to put a figure on the savings but indicated that one of the combined group's two administration centres, which employ a total of 220 workers, would be closed.

Mr Thomas said the addition of the new outlets would lead to a step change in the group's organic growth. He intends to roll out some of Luminar's existing concepts, such as the installation of fitness centres above its clubs and the use of Smartcards by its customers. He said there was also potential to leverage off the value of the group's customer data by selling it on to companies such as Gap, the fashion chain which targets a similar section of the market.

Although five Northern Leisure directors have been invited to join the Luminar board, the chief executive, Adam Mills, chairman, Don Hanson, and Ray McEnhill the corporate development director, will move on once the deal goes unconditional next month.