Stonegate, the company behind the Slug and Lettuce, Walkabout and Yates chains, has snapped up the UK’s biggest pub-owner in a deal worth £3 billion.
Private equity-backed Stonegate is to buy FTSE 250-listed EIG, formerly known as Enterprise Inns, which has 4,400 pubs and properties across the country.
Stonegate’s bid values EIG’s shares at a total of nearly £1.3bn, or 285p each, which is 38.5 per cent above the closing price on Wednesday, the companies said. Including debt, the deal is worth £3bn.
The offer is approximately 11.4 times EIG’s underlying earnings of £261 million for the financial year to 30 September 2018.
It represents the second high-stakes move in recent months for TDR Capital, the private equity firm that owns Stonegate, after it bought We Buy Any Car parent BCA Marketplace for £1.9bn in June.
Stonegate said: “With greater scale and diversification, Stonegate believes that the combined group will be better-positioned to compete effectively in what is expected to be a challenging operating environment for the foreseeable future.”
The group, which currently has 43 pubs in Scotland, was set up by TDR in 2010 as a vehicle to buy 333 pubs from Mitchells & Butlers. It has subsequently spent £350m on expansions and now has more than 765 sites UK-wide following 11 acquisitions in the last nine years.
EIG chairman Robert Walker said: “The commercial benefits of combining the companies are compelling. Stonegate is committed to continuing to invest in the business for the future benefit of the combined business, tenants and employees. The EIG board believes that this is a combination it can recommend with confidence to shareholders and stakeholders alike.”
The deal is set to be put to a vote of EIG shareholders, but is unlikely to face any opposition, with the board recommending the deal.
Russ Mould, investment director at AJ Bell, said the move represents “a very impressive turnaround, which has seen EIG spend years drowning in debt before rebuilding its business and getting its finances in order”.
He added: “Its estate was cleaned up just in time for EIG to be in prime position to benefit from a structural shift in the market from food to drinks-led demand.
“EIG is all about the latter and so it is perhaps no surprise that one of its closest rivals thought it was time to join forces.
“The shares were trading at 27p in January 2012 and Stonegate is now offering 285p cash per share – implying an incredible 955 per cent return for any investor who held the stock during its darkest times.”
It is the latest in a long line of deals and bids by private equity firms, who are keen to buy out publicly-listed companies. Last summer it was revealed that Stonegate is acquiring bar brand Be At One alongside a set of 15 bars across London.