Marston's raises £176m via rights issue

Midlands brewer Marston's is to raise around £176m before costs via a rights issue, primarily to fund the acquisition and building of new pubs.

The group is the latest in the pub sector to come to the market looking for cash, after Punch Taverns announced it was placing 350 million shares to raise £375m earlier this week.

Marston's announced today a fully underwritten 11 for 10 rights issue, with nearly 299 million shares being issued at a price of 59p each, a discount of nearly 40 per cent on the closing price of 140.25p on June 17, 2009.

It had built 30 new pubs in the past five years, but rising costs and the country's economic situation meant this strategy had effectively ground to a halt.

The group said the new funds would enable to take advantage of opportunities "to secure attractive sites on more competitive terms and benefit from falls in average development costs".

Marston's expects to open between 20 and 25 new pubs a year "in the short term", with 15 expected to be delivered in the first full year to October 2, 2010.

Ralph Findlay, Marston's chief executive, said the rights issue would "allow us to accelerate the roll-out of new build pubs in attractive locations and at attractive investment costs".

The group said it believed it could deliver returns on invested capital "in excess" of the target level of 15 per cent earnings before interest, tax, depreciation and amortisation from the new build programme, plus the investment had a "lower risk profile" than that often associated with buying packages of existing pubs.

Marston's said trading across its managed pub estate saw sales up 1.1 per cent in the 16 weeks to June 6, 2009.

The performance of its tenanted pub business and brewing operation were "consistent with those reported at the interim 2009", when Marston's said sales across the former were down nearly seven per cent, with the beer company's turnover up 19 per cent, boosted by the group's acquisition of the Wychwood brewery.

Marston's shares were down 16.75 at 123.5p in early trading today.