M&B sells 333 pubs to TDR Capital

Mitchells & Butlers(M&B) has sold 333 wet-led pubs to TDR Capital for £373m.

The sale is in line with M&B's strategy to withdraw from the lower price, drinks-led market and the late night high street bars and venues as announced in March 2010.

On completion in November, £500m will have been realised from recent non-core disposals.

The pubs had EBITDA and operating profit in the 52 weeks ended 10 April 2010 of £52m and £35m respectively. This represents an EBITDA multiple of 7.2x on the gross proceeds.

20% of the pubs are short leasehold generating £8m of EBITDA and £2m of operating profit in the 52 weeks ended 10 April 2010.

The company intends to reinvest the proceeds into growth opportunities offered in the informal eating out market.

Following the disposal, M&B will have 1,580 restaurants and food-led pubs with higher growth potential. Each year since 2007 this core business has grown like-for-like sales by around 1 percentage point more than the historically reported Mitchells & Butlers' results whilst operating profit per pub has increased by 3% per annum.

Including the gross proceeds from all the non-core disposals, net debt at 10 April 2010 would have been £2,013m, comprising £2,303m of securitised long term debt and £290m of cash.

Chairman John Lovering said: "I am delighted with the progress being made on reshaping Mitchells & Butlers' portfolio in line with the strategy we announced in March. Adam Fowle and the new management team are making excellent progress in accelerating the pace of change throughout the organisation. The cash resources released by the sale programme will allow the Company to accelerate its growth into the informal eating out market."

Chief executive Adam Fowle said: "We are pleased that we have been able to announce the exit from our price sensitive drinks-led pubs and our late night venues in a single transaction. This disposal, when combined with the sale of our lodge and bowling businesses, completes the first stage of our strategy. This will now enable us to reinvest in the informal eating out market where our market leading brands, corporate scale and operational capability will deliver attractive growth and investment returns for our shareholders."

TDR Capital is a private equity firm based in London and founded in 2002 - it currently manages funds worth €2.6 billion. The 333 M&B pubs include 52 Scream bars, 71 Bar and Venues, 75 Town pubs, 67 community pubs and 68 other small pubs. Average weekly takings per pub are around £13,800 per week.