Greene King agrees takeover deal for Spirit

Rooney Anand, chief executive of Greene King

Rooney Anand, chief executive of Greene King - Credit: Archant

Suffolk-based Greene King is poised to carve itself a bigger slice of the fast-growing dining out market after agreeing a £773.6 million deal to acquire the Spirit Pub Company.

The addition of Spirit, which owns pub restaurant brands including Chef & Brewer, Fayre & Square and Flaming Grill, would leave Bury St Edmunds-based Greene King with an estate of more than 3,000 managed and leased pubs.

Spirit’s directors are recommending its shareholders to accept the cash and shares offer, which would hand Spirit investors a 28.9% stake in the enlarged Greene King business

Greene King, which currently has around 1,900 pubs and restaurants as well as its brewing operation in Bury and another at Dunbar in Scotland, is rebalancing its estate to towards more profitable outlets which it manages directly rather than tenanted and leased operations.

Its managed estate already includes food-led brands such as Hungry Horse, Old English Inns and Loch Fyne Seafood & Grill, and it is particularly attracted to Spirit by its strong position in the lucrative London and South East regions.

Spirit has an estate of 794 managed pubs, which also includes the drinks-based Taylor Walker and John Barras chains, plus a leased estate of 433 pubs, most of which are former managed sites with six-figure average annual net income.

Under the deal, Spirit shareholders will receive 0.1322 new Greene King shares and 8p in cash for every Spirit share currently held. The cash element will consist of a 1.5p per share final dividend for 2014 and a special interim dividend of 6.5p per share.

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Based on Greene King’s closing share price on Monday, the offer values each Spirit share at 115p, representing a premium of 52.2% compared with their value of 75.5p on September 22, the day before Greene King’s initial approach.

Greene King chief executive Rooney Anand described the acquisition as a key step towards the company’s objective of building the “best pubs and beer business” in the UK.

He added: “This exciting combination of the Spirit business with Greene King accelerates our momentum and is in line with our stated strategy of further improving the quality of our pub estate and increasing exposure to the growing eating-out sector. This offer represents a fair price for Spirit’s high quality estate that fits well within the Greene King portfolio on both a brand and geographic basis, expanding our presence in the attractive London and South East area.”

The agreed deal trumps a surprise intervention by Irish drinks group C&C, owner of Magners cider and Tennent’s lager, which last month tabled a cash and shares offer for Spirit valued at around £750m.

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