Greene King offers £207.5m rights issue

Greene King is hoping to raise £207.5m through a new rights issue to fund acquisitions and pay off some of its securitised debt.

The Suffolk brewer and operator is to issue 80,749,647 new shares at a price of 270p underwritten by Deutsche Bank AG, London Branch, which is also acting as Joint Sponsor and Joint Financial Adviser with Lazard & Co.

Greene King plans to use the funds to "make selective acquisitions at attractive prices of freehold, retail pubs in the Home Counties, London and Scotland" and repurchase some of its securitised debt "at significantly below par value to take advantage of the current credit market conditions".

"Greene King is currently unique amongst the major pub companies in paying down debt while keeping up levels of capital investment and continuing to pay dividends to our shareholders," said chief executive Rooney Anand.

"This has been achieved through a consistent, long-term approach combined with strong operational skills and financial discipline throughout our businesses. Recent trading, which has been resilient against a demanding backdrop, underlines the success of this strategy.

"Today's rights issue will enable us to take advantage of a compelling opportunity both to enhance our estate and further strengthen our sound capital position. The increase in high quality pubs being put up for sale will deliver chances to make earnings-accretive acquisitions.

"At the same time, there is the potential to opportunistically buy back our debt at discounted levels. These combined actions will make Greene King an even stronger business."

Greene King said that despite the worsening economic climate, trading had generally improved. Like-for-like sales at managed outlets were up 0.8% on last year for the 49 weeks to date while like-for-like profit at its tenanted division was down 6% after 48 weeks.

Brewing volumes are up 1.8% and sales at its Scottish Belhaven managed pub business are up 1.8% on a like-for-like basis with sales growth of 5%.

It has sold 124 pieces of property and land to raise £43m.

Good news​

Analyst Mark Brumby of Blue Oar Securities said: "This is a smart move and, as we have mentioned for some time, the group is unlikely to be alone in concluding that now is a sensible time to be conservatively investing in assets.

"Trading is improved and, with mortgage rates at all time lows, fuel costs falling and most of us still in work, so it should be.

"We may have an average or even above average summer and that will help. 2010, on the other hand, could be pretty grim — but let's not worry about that just yet and take this fund raising at face value — it is good news for GNK and is good news for the sector as a whole."