Greene King and Spirit agree £773.6m deal
The offer (including the cash payment) values each Spirit Share at 115 pence based on the closing price of a Greene King Share on 3 November 2014 of 808.5 pence.
The offer (including the cash payment) implies an enterprise value multiple of approximately 10.2 times Spirit’s EBITDA for the 52 weeks ended 16 August 2014.
Following completion of the offer, Spirit Shareholders will hold approximately 28.9% of the combined group and Greene King Shareholders will hold approximately 71.1% of the combined group.
Synergies
Greene King believes that the combined group can be expected to achieve cost synergies of at least £30m per annum. The one-off costs of delivering these savings are expected to total approximately £25m. Approximately 40% of synergies are expected to be realised in 2015/16, rising to 80% in 2016/17, and 98% in 2017/18.
The companies said that the expected synergies will accrue as a direct result of the success of the offer and would not be achieved on a standalone basis.
The boards of @greeneking & @spiritpubco have today reached agreement on the terms of a combination of the two companies. More follows...
— Greene King (@greeneking) November 4, 2014
Walker Boyd, chairman of Spirit, said: "Over the last several years Spirit’s team, under Mike Tye, has delivered a turnaround of the business and put it firmly on the growth path. Since the demerger we have pursued a successful strategy of investing in brands, people, infrastructure and property which, when combined with our strong balance sheet, positions the business well for future growth.
"The combination with Greene King will take this to the next level, creating the UK’s leading pub group with further opportunities for growth and accelerating progress towards our objectives of delivering attractive returns for investors, flawless operational execution for guests and compelling development opportunities for our people."
Exciting
Rooney Anand, chief executive of Greene King, said: “The proposed acquisition represents a key step towards our objective of building the best pubs and beer business in the UK. This exciting combination of the Spirit business with Greene King accelerates our momentum and is in line with our stated strategy of further improving the quality of our pub estate and increasing exposure to the growing eating-out sector.
"This offer represents a fair price for Spirit’s high quality estate that fits well within the Greene King portfolio on both a brand and geographic basis, expanding our presence in the attractive London and South East area. The combined business will deliver the best pub portfolio in the UK as we combine high quality pub assets, industry-leading brands and talented hospitality teams.
"We believe this acquisition will drive attractive long term returns for both sets of shareholders, with the combined business benefitting from significant operational efficiencies and cost savings."
Greene King currently operates over 1,900 managed, tenanted, leased and franchised pubs, restaurants and hotels.
Spirit currently operates 1,227 pubs across the UK with a particular focus on London and the South East. Spirit’s business is divided into two main divisions: a managed pub business of 794 pubs and a leased pub business of 433 pubs.
