Cains goes public with Honeycombe Leisure takeover

The management of Liverpool brewer Robert Cain has undertaken a reverse takeover of troubled pub group Honeycombe Leisure.

Under the deal, Honeycombe will acquire the share capital of Robert Cain & Co, and a new business, Cains Beer Company, will be created. The new business, which will trade on AIM from June 8, will be valued at around £37m.

The business will place 52,000,000 shares, which in combination with the loan facilities of £2.56m, will raise up to £5.1m.

Sudarghara Dusanj, who along with his brother Ajmail rescued Cains from imminent collapse five years ago, said the move was a "quantum leap" for his company and would serve to fuel the pair's ambition to grow the business.

"We've always wanted to expand our retail arm and Honeycombe Leisure is a good geographical fit and the pubs fit our profile," said Sudarghara.

Sudarghara and Ajmail will take on the roles of the new group's chief executive and chief operating officer respectively. The brothers will own 57.65 per cent. of the enlarged business.

Under the terms of the deal Cains has effectively reversed into the AIM-listed Honeycombe Leisure, which owns and operates around 100 pubs in the North West and whose shares were suspended last week pending today's announcement.

Cains is set pump £10m-worth of investment in the Honeycombe estate, secured through equity, loan notes and banking facilities.

Acknowledging that Honeycombe has had its problems in the past Sudarghara said the Liverpool brewer was not underestimating the task involved.

"It is a turnaround and there is work to do on the estate," he said, adding the refurbishment programme would take "years to complete".

The deal takes Cains estate from nine to more than 100 pubs and getting the brewer's beers into a wider estate was a key element behind the deal.

Around 85 of Honeycombe's 100 pubs are managed and currently untied for beer, said Sudarghara, offering Cains significant opportunities to expand its beer brand coverage.

Some 25 of the pubs are freehold, he added.

Dusanj could not say how many of Honeycombe Leisure's 20 Preston-based staff would be affected by the takeover, but he confirmed the plan was to have one central office for the new group based in Liverpool.

"We want to get in there and conduct a proper review of the business," he said, adding that the group had "no plans to sell any of the pubs at this stage".

A stock marketing listing increases the reporting and disclosure requirements for the family-run company, but Dusanj said exchange requirements were worth the benefits a listing would bring. "A listing on AIM will give us access to capital and raise our profile. This deal is part of our ambition to grow the business via our brands and our pubs.

Dusanj said the new company would not be in the market for more pubs for the foreseeable future.

"We are thinking long term. This is a quantum leap for us and we will now keep our heads down and work on the integration of the two businesses."