Stonegate-Town & City merger confirmed
TDR Capital, the private equity firm, has confirmed the merger of Stonegate Pub Company and Town & City Pub Company, as revealed by the Publican's Morning Advertiser yesterday.
It is understood that Town & City backers Kaupthing and Commerzbank has taken a debt and equity position in the new merged companies.
Stonegate, backed by TDR, completed the acquisition of 333 Mitchells & Butlers wet-led pubs last year and has now merged with Yates's and slug & Lettuce operator Town & City to create the largest privately held managed pub operator in the UK.
The new group operates 560 pubs with revenues approaching half a billion pounds and employs over 10,000 people.
The new management team at the merged group, which will be called Stonegate Pub Company, with TDR as the majority owner, will comprise of Ian Payne continuing as chairman, Toby Smith as chief executive, Chris Keen as chief financial officer, Suzanne Baker as commercial director and Graham Jones as chief operating officer.
Combined the team have well over 100 years of experience in the industry.
Manjit Dale, TDR's founding partner, said: "We are extremely pleased with this combination, which will create the largest privately held managed pub operator in the UK.
"Stonegate has developed into a leading pub operator with a high-quality, well-located estate with over 300 pubs in most major towns and cities across the UK.
"Town & City has a strong customer proposition and will be an excellent complement to Stonegate. It has been well stewarded through a very tough trading period by its banking consortium owners and we believe will further benefit from being owned by a dedicated, strong pub and leisure group.
"The UK pub industry continues to undergo significant change. This merger further strengthens our platform and positions us to be leaders in this shake-up."
Payne, said: "The merger of these two companies makes excellent strategic and commercial sense. Both businesses are in year to date sales growth and, by combining their excellent people and properties, the enlarged Stonegate is in a strong position to continue to outperform the market."
Smith said: "I am delighted that we have been able to bring together two exceptional businesses which together will create a formidable force in the UK pub industry."
PMA Insight
Sources close to the merger of Stonegate and Town & City are calling it "the longest deal on the longest day". The deal was concluded on Tuesday although talks on the merger began before Easter last year.
Chairman Ian Payne tells Publican's Morning Advertiser that the deal was made less easy because of the stellar performance of Town & City in the past two years. It's enjoyed two consecutive years of 8 to 9% sales growth, with Slug & Lettuce enjoying double-digit growth for the whole of last year.
"Had the company (Town & City) not been performing so well it would have easier," he said. "I haven't seen anyone doing better in the sector - Town & City has the best management team in the business. Slug & Lettuce is also the best performing brand - it's beaten every set of internal figures."
Meanwhile, Payne reports that Stonegate's 333 wet-led pubs returned to sales growth three months after acquisition — and has been in growth for the first five months of 2011.
The company is now in the middle of installng a new Torex Epos system across the merged estate at the rate of 40 to 60 sites a week ahead of the end of the transitional services arrangement with Mitchells & Butlers on the 333 pubs on 12 August.
Asked about TDR's exit plan, Payne said: "We've not had an exit plan from TDR - the plan is to build the best business we can and then worry about an exit plan. We've got the best management team in the business and we're now a clear number two in the high street."
