Greene King Plc (GNK), the U.K. brewer of Old Speckled Hen pale ale, agreed to buy Capital Pub Co. for 70 million pounds ($112 million) to expand its presence in the premium London food-and-drink market.
The recommended cash offer is for 235 pence a share, Bury St. Edmunds, England-based Greene King said in a statement distributed by the Regulatory News Service today.
Capital Pub said last month it rejected an indicative approach from Fuller, Smith & Turner Plc of 200 pence a share, citing the comparative strength of the London market as the capital prepares for next year’s Olympics. Greene King said today the proposed acquisition would boost its presence in the “premium eating and drinking out market” in London, as well as allowing it to add accommodation offerings.
“The proposed acquisition represents another firm step as we continue to expand our presence in London,” said Greene King Chief Executive Officer Rooney Anand. “Capital Pubs would bring a further 34 premium pub assets and take our Greater London estate to approximately 250 at a time when London is outperforming the national pub market.”
Greene King shares rose 0.3 percent to 481.6 pence at the 4:30 p.m. close in London trading. The stock has gained less than 1 percent this year, giving the company a market value of 1.04 billion pounds. Capital Pub climbed 11 percent to close at 233.5 pence.
The deal would be earnings-enhancing in the first full year of trading, Greene King said. Nigel Parson, an analyst at Evolution Securities, estimated full-year “post-synergies” earnings before interest, taxes, depreciation and amortization of more than 12 million pounds.
A total number of 250 pubs is “an increasingly important statistic given what we forecast to be a very resilient market place over and above the likely positive 2012 Olympics impact,” said Greg Feehely, an analyst at Altium Securities.
Fuller, Smith & Turner said that following Greene King’s recommended cash offer it “has no intention to make an offer for Capital.”
Lazard & Co. Ltd. and Deutsche Bank AG are acting for Greene King. PricewaterhouseCoopers and Panmure Gordon (UK) Ltd. are acting for Capital Pub.
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