Greene King seals new £775m deal for pub rival

Greene King: pub merger worth 774 million pounds with Spirit Group. Picture: Contributed

GK and Spirit agreed a deal worth about 115p per share, including a cash payment of 8p per share, after Spirit had rejected the first offer in September of 100p, or £661m. Spirit shareholders will own 29 per cent of the new entity.

The merger will see GK, which owns Belhaven in Scotland, own some 3,100 managed and tenanted pubs, making it the third biggest in the UK in terms of outlets, but the biggest in terms of sales.

It brings together a host of well-known brand names including GK’s Hungry Horse and Loch Fyne restaurants, and Spirit’s Chef & Brewer, Flaming Grill and Fayre & Square. Spirit’s Scottish pubs include Doctors and Milnes in Edinburgh and Cairns bar in Glasgow. GK is also known for ales including Belhaven and Old Speckled Hen.

GK chief executive Rooney Anand, pictured, said yesterday he believed the combined group – which Spirit shareholders are yet to vote on – could make cost savings of at least £30 million. It is thought the main overlap for cutbacks is likely to be in head office and support functions, but GK said it had not yet developed proposals on headcount reductions.

Anand said: “This exciting combination … accelerates our momentum and is in line with our strategy of further improving the quality of our pub estate and increasing exposure to the growing eating-out sector.”

C&C – whose board includes former Scottish & Newcastle Breweries executives, including chairman Sir Brian Stewart and chief executive Stephen Glancey – has until Thursday, 20 November to make a firm offer for Spirit under City Takeover Panel rules, following its rebuffed first approach last week.

Most analysts believe it is unlikely that C&C, owner of Magners cider, will do so, partly due to doubts about the strategic rationale of what would be a big diversification for the firm from brewing into pubs.

Spirit chairman Walker Boyd said: “Over the past several years Spirit’s team, under Mike Tye, has delivered a turnaround of the business and put it firmly on the growth path.”

Anand said it was “too early to say” what would happen to Tye’s role in the new organisation. Suffolk-based GK brews its ales at Bury St Edmunds and Dunbar in Scotland, and employs more than 23,500 people, while Spirit, headquartered in Burton-upon-Trend, has 17,000 staff.

The combined group will focus mainly on its managed estate with its higher profit margins, particularly in pub dining. But Anand said he remained committed to the tenanted pubs.

Analysts said a driver for the deal was GK’s desire to get greater presence in London and south-east England.