The Boards of Greene King and Spirit have announced that they have reached agreement on the terms of a recommended offer by Greene King to acquire the entire issued and to be issued ordinary share capital of Spirit. The Spirit Directors intend unanimously to recommend that Spirit Shareholders vote in favour of the offer.
Creating the UK’s leading pub group
Commenting on the Offer, 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.”
Building the best pubs and beer business in the UK
Commenting on the Offer, Rooney Anand, CEO 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.”
The Offer
- Spirit Shareholders will receive: for each Spirit Share 0.1322 New Greene King Shares and 8 pence in cash (payable by Spirit as dividends)
- The cash payment of 8 pence per Spirit Share will comprise the proposed 2014 final dividend of 1.5 pence per Spirit Share payable on 10 February 2015 to Spirit Shareholders on the register on 16 January 2015 and a special interim dividend of 6.5 pence per Spirit Share payable to Spirit Shareholders on the register on the Effective Date.
Valuation
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, and values the entire issued and to be issued ordinary share capital of Spirit at approximately £773.6 million and represents a premium of approximately:
- 52.2 per cent. to the undisturbed closing price of 75.5 pence per Spirit Share on 22
September 2014 (being the last Business Day prior to the start of the Offer Period); and
- 53.0 per cent. to the volume weighted average closing price of approximately 75 pence per Spirit Share for the three-month period to 22 September 2014.
- In addition, the Offer 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 per cent of the Combined Group and Greene King Shareholders will hold approximately 71.1 per cent. of the Combined Group.
Cost synergies
The Board of Greene King believes that the Combined Group can be expected to achieve cost synergies of at least £30 million per annum. The one-off costs of delivering these savings are expected to total approximately £25 million.
Approximately 40 per cent. of synergies are expected to be realised in 2015/16, rising to 80 per cent. in 2016/17, and 98 per cent. in 2017/18. The expected synergies will accrue as a direct result of the success of the Offer and would not be achieved on a standalone basis.