Pub company EI Group (EIG) has agreed an all cash offer of 285p from Stonegate Pubs, a private operator of 772 pubs and bars. The shares are trading at the offer price, up 38.5% from last night’s close.
The acquisition values the company at £1.27bn pounds, and including debts equates to an enterprise value of £2.97bn, implying a multiple of 11.4 times EI Group’s underlying earnings before interest, depreciation and amortisation, (EBITDA) adjusted for the disposal of 370 commercial properties.
READ MORE ABOUT EIG HERE
Stonegate began trading in 2010 after it acquired 333 pubs from Mitchells & Butlers (MAB) and has since grown it estate through a series of strategic acquisitions, creating a multi-format strategy.
It has built a diversified offering serving a wide range of customer demographics and consumer trends.
Stonegate will continue to execute EI Group’s existing strategy and believes that the combined group will operate with greater scale and diversification.
This enhances its competitive position in what is expected to be a ‘challenging operating environment for the foreseeable future’.
COMPELLING COMBINATION
EI Group’s chairman Robert Walker said: ‘The commercial benefits of combining the companies are compelling. Stonegate is committed to continuing to invest in the business for the future benefit of the combined business, tenants and employees. The EI Group board believes that this is a combination it can recommend with confidence to shareholders and stakeholders alike’.
Although agreed, the transaction is conditional on approval by the requisite majority of shareholders and European and UK competition authorities as well as regulatory clearances from the FCA.
The transaction is being done at a premium valuation to other companies in the sector, such as Mitchells & Butlers and Marston’s (MARS), and might ignite interest in further consolidation.
