Greene King to buy Capital Pubs for £93m

By Lorraine Heller

- Last updated on GMT

Related tags: Executive officer, Chief executive officer

Greene King expects the acquisition of Capital will strengthen its position in London
Greene King expects the acquisition of Capital will strengthen its position in London
Greene King this morning announced it has agreed a deal to buy the London-based Capital Pub Company for £93m.

The move follows Capital’s rejection of a £54m offer from Fuller last month​, which it had said “substantially undervalued its business”.

However, Greene King came in with an offer of 235p a share for the 34-strong pub company, which marks a premium of 51 per cent on the closing price of 155.5p on 16 June.

Premium food and drink growth

The Suffolk-based brewer said the acquisition of Capital Pubs is an opportunity to create an “even stronger” retailer within London’s growing premium eating and drinking out market.

The combined business will operate approximately 250 pubs within Greater London.

Greene King directors said they see “significant benefits” from operating Capital Pubs alongside the group’s recent acquisition, Realpubs, and its existing premium London pubs. “There are also specific opportunities to grow food and accommodation participation within Capital Pubs,” they said.

“The proposed acquisition represents another firm step as we continue to expand our presence in London,” said Rooney Anand, chief executive officer of Greene King.

“Capital Pubs would bring a further 34 premium pub assets and take our Greater London estate to approximately 250 at a time when London is outperforming the national pub market.

“This offer represents a fair price for a high quality, largely freehold pub estate. Capital Pubs is a premium London pub company that fully meets our criteria as we continue to progress our retail expansion strategy. Capital Pubs' estate fits well within the Greene King portfolio and we intend to combine it with our recently acquired Realpubs business, thereby generating attractive cost and revenue synergies”.

Cultural fit

Capital, which had rejected Fuller’s lower bid last month as “without merit”, said the terms of the current offer were “fair and reasonable”.

“Greene King is an excellent cultural fit with Capital Pubs and will be a good home both for the business and for our staff,” said Clive Watson, chief executive officer of Capital Pubs.

“Greene King is renowned for nurturing the businesses it acquires and I have every confidence that Capital Pubs will continue to develop under its ownership. We have recommended Greene King’s deal to shareholders as we believe it reflects both our high quality business and its prospects”.

The acquisition of Capital Pubs is expected to be earnings enhancing to Greene King in the first full year of trading and will generate returns above Greene King’s cost of capital in year one.

Related topics: Business & Legislation, Pub & Bar

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2 comments

greenking

Posted by andrew bowles,

its a shame gk don't look after its old pubs that it already have been a lost tenant as the cost of my pub was too expensive and needing a full refit the brewery did not care and other tenants feel the same its buying up others but not spending any money on its own stock it has already after walking out with empty promess and £1.11p after 2and a half years it was sole destroying

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LIKE IT GREEN KING AND CAPITAL PUBS

Posted by DINESH R MAKWANA,

This deal, when it completes is, a superb move by both Greene King and Capital Pubs. It clearly shows a huge positive move of some value. The brewing industry if well marketed at the pub level has riches in the supermarket chains too. This move shows that the well thought and valued £70 million purchase by the intelligent management of Greene King values Capital Pubs in the right region on the strength of its excellent freehold property portfolio. Capital Pubs has shown that it's a great Greene King type company, (Greene King with sales exceeding £1 billion a year), and that it is competent enough to own them (and I am sure the excellent brands like Mitchells and Butler or JD Wetherspoons would have featured too). It is not now dealing with some simpleton cheap outfit.The genuinely clever and board senior staff of both these superb brands can run charity marathons knowing that their charity work is genuine, and unlike some, and in line with competent business management and non prejudicial care. Well done indeed.

Best Wishes,

DINESH R MAKWANA (DREAMWORDS AND INORBITS)

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