Bury St Edmunds: Spirit Pub Company set to accept £725m offer from Greene King
09:24 20 October 2014
Pub company Spirit, whose brands includes the Chef & Brewer chain, is poised to accept an improved takeover proposal from Greene King worth £725million.
Spirit, which has more than 1,200 pubs following its demerger from Punch Taverns in 2011, is holding talks with the Hungry Horse owner in a bid to finalise the deal before an extended Takeover Panel deadline of October 30.
Bury St Edmunds-based Greene King, which has around 1,900 pubs and two brewing operations – one in Bury and another at Dunbar in Scotland – approached its rival about a tie-up last month but its offer of 100p a share or £661m was rejected by Spirit as undervaluing the business.
However, its latest cash and shares offer of about 109.5p a share, which will give Spirit shareholders a 29% stake in the combined Greene King, looks set to succeed.
Spirit said today: “The board of Spirit has indicated to Greene King that it would be willing to recommend an offer at the level of the revised proposal to Spirit shareholders subject to the satisfactory resolution of the other terms of the offer.”
Greene King, a member of the EADT/EDP Top100 listing of the 100 biggest companies in Suffolk and Norfolk, has made a number of acquisitions and disposals in recent years as it continues to shift the balance of its pub estate towards more profitable outlets which it manages directly rather than tenanted operations.
Its other brands include Loch Fyne Restaurants, while its beers include Old Speckled Hen, Greene King IPA and Abbot Ale.
Spirit’s estate comprises more than 750 managed pubs, with its brands also including Fayre & Square and Flaming Grill pub restaurants as well as the drink-led John Barras and Taylor Walker chains.
Its properties in East Anglia include the Royal George in Ipswich, the Red Lion at Martlesham, the Grosvenor in Felixstowe, the Rovers Tye in Colchester and the Rose & Crown in Wivenhoe.
Analysts at N+1 Singer said: “With the prospect of another party entering the fray pretty limited in our view, we expect Greene King to prevail with its offer at circa 110p.”
In July, Greene King reported a fourth consecutive year of record results, with tunover for the 53 weeks to May 4 rising by 6.5% on the previous year (adjusted for the extra week’s trading) to £1.302billion and profit before tax and exceptional items by 7.4% to £173.1m.
Last month, the company reported a challenging summer for its managed house division, with like-for-like sales edging ahead by 0.4% in the 18 weeks to September 7, which it attributed to tough comparatives a year earlier and a disappointing World Cup, due to England’s early exit from the tournament.
However, it said it expected an improved trend within the retail division as the year progressed, and that a good start to the year for its leased and tenanted pubs and its brewing business would continue.
Spirit is due to announce its preliminary results for the year to August 23 on Wednesday, October 22.