Comment: Greene King move in spirit of new pub era

It is good for Spirit shareholders, with the increased price of 109.5p now offered 45 per cent above the 75p that Spirit shares were trading at before Greene King’s first approach was made public last month.

It is also more than twice the 51p at which the target’s shares started trading when it demerged from Punch. That is not a bad return at all, particularly as Spirit shareholders will end up owning 29 per cent of the new combined business with GK.

For the acquirer, it is an apparently seamless step-change in GK’s mission to focus mainly on managed pubs, which have much better margins than tenanted outlets, partly due to a far superior food offering in tune with the zeitgeist of the times.

GK chief executive Rooney Anand has been steadily pruning back the company’s tenanted outlets to focus on managed brands, including Hungry Horse, Old English Inns and Loch Fyne.

Spirit, under boss Mike Tye, has been pursuing a similar strategy. The company has about 450 leased outlets and more than 750 managed pubs, with the latter contributing nearly  90 per cent of group revenues.

The sharply contrasting returns between pub tenancies and managed houses is shown by the fact that, on outlets alone, the new, bigger GK will still only be the third-biggest player in Britain, with 3,100 pubs and eateries.

That compares with 5,500 at Enterprise Inns and 4,000 at Punch. However, with combined sales of more than £2 billion a year, the enlarged GK dwarfs Enterprise’s £640m of revenues and Punch’s £460m.

There should be obvious back office and distribution savings from the merger, while Anand’s group will also get far more shop windows for its leading ale brands, which include Greene King IPA, Dunbar-based Belhaven and Abbot Ale.

It seems unlikely a rival bidder will come in. The deal looks likely to go ahead, and deserves to do so.

CBI gets nervy about EU migration stand-off

Britain’s big businesses are getting very nervy about the hawkishness of the debate on free movement of labour within the European Union. It is not difficult to see the CBI employers’ lobby group’s position: firmly in the stay-in-the-EU, single-market camp, and free movement of labour being an integral component of that.

However, the robust exchanges on exactly that issue between Prime Minister David Cameron and European Commission president Jose Manuel Barroso show the debate is heating up.

And, if Cameron does retain power at next year’s election, with or without power-sharing, expect the business voice against quitting Europe at a 2017 referendum to become as orchestrated as it was in the home straight of the Scottish independence referendum.