Another day, another acquisition
As City analysts were busy dismissing yet another merger rumour concerning Marston's and Greene King, the latter's Rooney Anand was busy with his socket set, bolting New Century Inns (NCI) onto the side of his company.
The £32.6m acquisition, while small, proves that corporate activity is possible in a market driven to distraction by credit fears. With organic growth in pubs remaining a challenge, Greene King's desire to pay up for what it deems as earnings-enhancing assets remains undimmed - following the brewer's eyebrow-raising acquisition of seafood restaurant chain Loch Fyne in August.
The reasons for NCI selling up were straight-forward. The business wasn't generating enough cash to plough back into the group, and board members weren't prepared to pump in more of their own money. A sale was the only alternative. Greene King, on the other hand, can make it work.
While NCI's Alistair Arkley's comments viz the group's decision to sell are noteworthy enough, it was his point that tenanted pub businesses with fewer than 50 or so sites "were a non-starter" that grabbed my attention. He suggested that if you're going to run tenanted pubs you had better do it on a big scale, since to do otherwise meant facing potentially "mind-blowing" cost issues.
There must be dozens of such sub-50 pub companies in the UK. One wonders how many are facing the choice which confronted NCI during the summer; throw yet more money at the problem - at a time when the industry is facing some of its biggest challenges - or bite the bullet, take the money and run.
As a final aside, it will be interesting to see how many of NCI's 49 pubs GK will still own this time next year. I guess that'll just have to remain one of life's shorter-term mysteries...
