Spirit agrees to Â£770m Greene King acquisition
Pub groups Greene King and Spirit have agreed to a takeover deal after thrashing out terms over the past two months. Suffolk-based Greene King will pay a premium for the company's shares valuing Spirit at more than £770m.
Following completion of the transaction, Spirit shareholders will hold about 28.9 per cent of the combined group and Greene King will hold 71.1 per cent.
Spirit chairman Walker Boyd said: "Over the last several years Spirit's team, under Mike Tye, has delivered a turnaround of the business and put it firmly on the growth path.
"Since the demerger [from Punch Taverns] we have pursued a successful strategy of investing in brands, people, infrastructure and property which, when combined with our strong balance sheet, positions the business well for future growth.
"The combination with Greene King will take this to the next level, creating the UK's leading pub group with further opportunities for growth and accelerating progress towards our objectives of delivering attractive returns for investors, flawless operational execution for guests and compelling development opportunities for our people."
The cash-and-shares offer values each share at 115p each based on the closing price of a Greene King share on 3 November 2014 of 808.5p.
It values the entire share capital of Spirit at approximately £773.6m and represents a premium of 52.2 per cent to the closing price of 75.5p per share on 22 September 2014 – the last business day prior to the start of the offer period.
In addition, the bid gives an enterprise value multiple of more than ten times Spirit's EBITDA for the 52 weeks ended 16 August 2014.
The cash payment of 8p a share will be made up of the proposed 2014 final dividend of 1.5p a share payable to stakeholders on 10 February 2015 and a special interim dividend of 6.5p.
Greene King chief executive Rooney Anand said: "The proposed acquisition represents a key step towards our objective of building the best pubs and beer business in the UK.
"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."
Spirit received an improved takeover offer last month (October 2014) from Greene King worth about £723m at 109.5p a share. The pubco had rejected a preliminary offer in September of 100p per share worth about £660m.
At the end of October Magners maker C&C put a shock offer on the table thought to be worth about £760m which was rejected by Spirit.
The newly agreed offer is conditional on the approval of Greene King and Spirit shareholders and clearance by the Competition and Markets Authority.
Greene King, incorporated in1887, operates more than 1,900 managed, tenanted, leased and franchised pubs, restaurants and hotels, as well as brewing its own beer.
It had sales of more than £1.3bn in the year ended 4 May 2014.
Spirit operates more than 1,220 pubs across the UK with a particular focus on London and the South East. It pushed revenue up by more than £40m to past £800m in the year ended 23 August 2014 sending earnings and profits higher than a year ago.