Greene King, the Suffolk UK brewer and food & drink chain specialist, has agreed to sell 275 non-core tenanted and leased pubs to Hawthorn Leisure Limited – backed by Avenue Capital Group and May Capital LLP – for £75.6 million.
Part of the cash could be used for more synergistic acquisitions and some to reduce long-term gearing.
The pubs, located across the UK, generated EBITDA in the last year of£12.4m, implying a disposal multiple of 6.1x. The book value of the outlets was £93.8m and the deal should be complete by early June.
Greene King and Hawthorn Leisure have also agreed a three-year beer supply deal for the pubs, securing continued and valuable nationwide distribution for the brewer’s industry-leading ale brand portfolio.
CEO Rooney Anand said the disposal held a threefold benefit for the business: It increases the company's exposure to the faster-growing retail sector; further improves the quality and outlook of its Pub Partners' division earnings; and further strengthens the balance sheet providing an opportunity to selectively accelerate retail investment and expansion.
He said: “Our strategic plan, announced in July 2010, was to reduce our tenanted and leased estate to 1,200 sites. We believe that a smaller estate than originally envisaged is now more appropriate going forward as we move increasingly to higher growth areas in our markets and to improve the customer offer.
“The retained Pub Partners estate represents a high quality, cash generative business, although it is likely to become smaller still as we transfer some sites back to retail and seek to dispose of additional sites in the estate to improve both yield and returns. We now expect to reduce the estate to around 750 sites.
“It is a sign of the strength of the business and our balance sheet that we have several options for the funds raised through this sale. Depending on site availability and attractive valuations, our first priority will be to seek to further accelerate our retail expansion plans.
“In the absence of increased investment opportunities, we would also retain the option of using the funds to reduce our overall longer-term gearing position.”