Marston's, unveiling pub acqusition deals with Eldridge Pope and Sovereign Inns this week, has broken, albeit temporarily, the 2,500 pub barrier (558 managed pubs and 1,960 tenanted pubs) - a record estate size for the super-regional. As many as 150 bottom-end pubs are likely to be sold in the coming year, but the net result will be an uplift in the overall quality of the estate, one of the benchmark tests of any purchase and subsequent churn.
The Eldridge Pope acquisition has been dismissed in some quarters for its lack of scale , but for Marston's this estate is a useful push south from its Midlands power-base and west from the south-east toehold it gained with its Wizard deal and Marston's can look further afield for new-build opportunities.
The overall quality of Eldridge Pope's estate is good, with average managed turnover at £13,000 per week and annual tenanted per pub Ebitda at a top drawer £57,000. The two years under Michael Cannon's own ership ha ve seen the major problems removed or reduced. Its Toad brand - which made a claim to be the most unlovely name ever given to a licensed retail venue - has been replaced by Que Pasa, a brand with solid food sales (20% of turnover) and a proper degree of differentiation. Most of the onerous leases former Eldridge Pope management entered into have been given the slip, although there appears to be a degree of bottom-end clearing up still to do. Interestingly, Marston's is dipping a second tentative toe into the high-street bar market. Buoyed by success at Pitcher & Piano, the company clearly feels this is the time to expand on the circuit with the right format and basics on issues such as lease terms. This increased bullishness was confirmed last year when it acquired the small Bluu chain from the Fat Cat Group. More fundamentally, there's confidence that food sales can be driven harder . For Marston's, the Eldridge Pope estate offers - with 26 pubs that have nice bedrooms - exposure to the West Country tourist trade. It might even make sense to begin marketing to tourists looking to combine stays in Dudley and Dorset.
On the smaller, tenanted side , there's not been the same degree of investment from Cannon . Three-year rolling tenancies prevail and there's a clear opportunity to attract a different kind of licensee by offering longer lease terms .
All in all, when a few sites are shaken loose and others re positioned, the Eldridge Pope estate is positioned well for growth areas . More generally, a perception has arisen in recent months that Marston's needed a deal to quieten takeover talk. Even last week, one analyst insisted th is double deal made Marston's no less of a takeover candidate. Chief executive Ralph Findlay would not be drawn on burble from the industry rumour mill , but was keen to talk about how Marston's remains one of the sector's best organic growth stories with 25 new-build sites opening this year and managed like-for-likes up by 7%. The Eldridge Pope deal came about after Marston's made an unsolicited approach last November. It shows, for my money, that Marston's is capable of identifying the right assets to buy - and avoiding paying over the odds .