Greene King ups stakes in £725m bid to buy Spirit

Chef & Brewer parent firm ­Spirit Pub Company is poised to accept an improved takeover proposal worth £725 million from rival Greene King.
Rooney Anand has led Greene King through changes this year as the pubs group shifts its focus. Picture: Greene KingRooney Anand has led Greene King through changes this year as the pubs group shifts its focus. Picture: Greene King
Rooney Anand has led Greene King through changes this year as the pubs group shifts its focus. Picture: Greene King

Spirit, which has more than 1,200 pubs following its demerger from Punch Taverns in 2011, is holding talks with the Belhaven owner in an effort to finalise the deal before an extended Takeover Panel deadline of 30 October.

Suffolk-based Greene King, which dates back to 1799 and has around 1,900 outlets, ­approached its rival about a combination last month, but its offer of 100p a share, or £661m, was rejected by Spirit as undervaluing the business and its “attractive prospects”.

Hide Ad
Hide Ad

However, its latest cash and shares offer of about 109.5p per share, which will give Spirit shareholders a 29 per cent stake in the combined business, looks set to succeed.

In a Stock Exchange statement, Spirit said: “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.”

Shares in Spirit, whose Scottish pubs include Doctors and Milnes in Edinburgh and Cairns bar in Glasgow, jumped by 9.6 per cent, or 8.75p, to close at 99.75p. They have now risen by more than a third in the past year. Shares in Greene King closed up 7p at 775p.

Greene King, led by chief executive Rooney Anand, has made a number of acquisitions and disposals this year as it continues to shift the balance of its estate towards more profitable outlets it manages rather than tenanted operations.

Its other brands include Loch Fyne Restaurants, while its beers including well-known ales including Old Speckled Hen and Greene King IPA.

Spirit is behind chains including Fayre & Square and Flaming Grill. Its managed division includes more than 750 pubs, with a further 450 leased outlets.

Analysts at N+1 Singer believe the improved approach will succeed. “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,” they said in a research note.

And Jeffrey Harwood of Oriel Securities said: ”There is clearly a high chance now of the deal proceeding.”

Hide Ad
Hide Ad

He added: “The price is within the range which we expected of 109.5 pence. So… it’s a good transaction for Spirit shareholders. There would also be significant savings Greene King can achieve by putting the two businesses together. So we see it as a favourable transaction for Greene King too.”

In July, Greene King unveiled plans to open at least 30 eateries a year by the end of the decade after reporting its fifth consecutive set of record annual results.

The company is seeking to grab a larger slice of the UK’s £48 billion market for eating out by targeting more people who are looking for meals and snacks throughout the week.

Its five-year strategy, due to kick in next year, would aim to see the group reduce its number of tenanted and leased pubs from more than 880 to 750 as its attention increasingly shifts towards food. Pre-tax profits rose to £173.1m in the year to 4 May, up from £158.2m a year earlier.

In May, Greene King pulled out of talks to buy the majority of pubs owned by rival Orchid Group. They were sold to Mitchells & Butlers for £266m.

Related topics: