Marston's acquires Eldridge Pope for £155.1m
Marston's, formerly Wolverhampton & Dudley Breweries, has acquired Eldridge Pope, the bar and pub operator, from Michael Cannon, for £155.1m.
The Eldridge estate, which was bought by Cannon for £82m in October 2004, currently consists of 135 pubs based predominately in Southern England, with 18 sites to be disposed of.
It also includes the Que Pasa high street brand and Fairdeed, a wholesale business, which distributes wines and spirits and packaged products to the Eldridge estate.
The continuing estate includes 95 managed pubs and 40 tenanted pubs, with freehold pubs contributing around 80% of outlet ebitda.
Marston's anticipates that the 18 sites to be disposed of will generate proceeds of up to £10m within the next 12 months.
The continuing estate of 135 pubs has a current unaudited run rate outlet ebitda of £16.9m, giving an acquisition multiple of 8.6 times.
In total, Eldridge has a current unaudited run rate ebitda before central overheads of £16m, including costs associated with Fairdeed and the 18 pubs to be disposed of which are expected to be eliminated through synergies and disposals.
As at September 2006, Eldridge Pope had audited gross operating assets of £116m.
It is anticipated that the acquisition will generate annual purchasing synergies of approximately £800,000, while central overhead costs of £5m per year will be reduced by approximately £2.9 million, and that costs associated with Fairdeed and the 18 pubs to be disposed of will be reduced by approximately £900,000.
These synergies are expected to be achieved in the first full financial year following acquisition. In addition, Marston's expects to generate a further £1m per year of purchasing synergies in the second financial year following acquisition.
The acquisition is expected to be earnings enhancing in the first full financial year following the acquisition.
Ralph Findlay, Chief Executive of Marston's, said: "We are delighted with the acquisition of Eldridge Pope. It has invested significantly in the business in recent years, and offers a high quality well managed estate, which complements our existing business both operationally and geographically.
"The Eldridge Pope estate should benefit from becoming a part of Marston's, and offers further opportunity for investment in the future."
Marton's said that the acquisition will provide opportunities to convert appropriate Eldridge sites into its existing formats including Pitcher & Piano, Tavern Table, Taverners Cavary and Two for One, as well as to further develop the Que Pasa format in its existing estate.
The company said that within Eldridge's tenanted estate there is the potential to move the current tenancy agreements to longer term Marston's Pub Company leases over time.
It also said that both the managed and tenanted pubs offer the opportunity for increased distribution of beers from Marston's Beer Company.
The acquisition was funded by the assumption of £17.1m of debentures and loan notes.
As part of the funding of the acquisition, Marston's has replaced its existing £275m corporate banking facility with £400m of new facilities.
Marston's has also reported a good start to its financial year.
It said that in Marston's Inns & Taverns, its managed pub division, like-for-like sales were up 7% in the 16 weeks to 20 January 2007 compared to the same period last year.
As previously reported, like-for-like sales were 9.1% ahead of last year in the eight weeks to 25 November 2006, and in the following eight weeks to 20 January 2007 were 5.2% ahead of last year.
The company said that strong growth in food sales contributed to this good performance.
The group also said that trading in Marston's Pub Company, its tenanted and leased pub division, has remained good and is ahead of last year.
Marston's Beer Company achieved strong volume and market share growth in premium ale against a weak beer market overall, with total beer volumes marginally below last year.
Findlay said: "Overall, our performance and cash flow has been in line with our expectations."
