Bury St Edmunds: Greene King agrees £75.6m deal to sell 275 pubs to new operator Hawthorn Leisure
10:22 01 May 2014
ADAM SMYTH PHOTOGRAPER
Greene King today announced the sale of 275 of its pubs in a deal valued at £75.6million.
The Bury St Edmunds-based pubs and brewing group is selling the properties, which area spread around the UK, to Hawthorn Leisure, a new operator backed by Avenue Capital Group and May Capital LLP.
Hawthorn has also agreed a three-year beer supply deal for the pubs, which Greene King said would secure valuable nationwide distribution for its portfolio of ale brands.
The deal, which is expected to complete by early June, involves tenanted and leased properties classed by Greene King a “non-core”.
It has been scaling down its tenanted and leased estate in recent years to improve average earnings within its Pub Partners division and indicated today that further disposals could be on the cards, saying it now plans to reduce the estate to around 750 compared with a target of 1,200 originally set in 2010.
At the time of its half-year results in December, Greene King owned a total of 2,226 pubs, restaurants and hotels, consisting of 1,218 within Pub Partners and 1,008 within its directly managed retail division which includes brands such as Hungry Horse, Old English Inns, Eating Inn and Loch Fyne.
Greene King, a member of the EADT/EDP Top100 listing of the 100 largest companies in Suffolk and Norfolk, said the sale of the pubs − which carry a book value of £93.8m and generated earnings of £12.4m last year − would also further strenthen its balance sheet and provide an opportunity to accelerate investment and expansion within the faster-growing retail sector.
Rooney Anand, Greene King chief executive, said: “We are pleased to have agreed this transaction with Hawthorn Leisure. Our strategic plan, announced in July 2010, was to reduce our tenanted and leased estate to 1,200 sites.
“We believe that a smaller estate than originally envisaged is now more appropriate going forward as we move increasingly to higher growth areas in our markets and to improve the customer offer.
“The retained Pub Partners estate represents a high quality, cash generative business, although it is likely to become smaller still as we transfer some sites back to retail and seek to dispose of additional sites in the estate to improve both yield and returns. We now expect to reduce the estate to around 750 sites.
“It is a sign of the strength of the business and our balance sheet that we have several options for the funds raised through this sale. Depending on site availability and attractive valuations, our first priority will be to seek to further accelerate our retail expansion plans.
“In the absence of increased investment opportunities, we would also retain the option of using the funds to reduce our overall longer-term gearing position.”