Premium pubs and hotels group Fuller, Smith & Turner (FSTA) announced its first significant acquisition since selling its brewing business to Japan’s Asahi. Its shares fell 1.45% to £10.20.
GOOD FIT
The company is paying £40m for Cotswold Inns and Hotels, a collection of seven freehold country inns and hotels and eight freehold staff cottages in the Cotswolds together with two leasehold bars in Birmingham. The properties will add an additional 201 hotel beds to the current portfolio of 830 beds.
The sites are well invested having been owned and operated by the previous owners, Michael and Pamela Horton since 1997.
The business is well established and generates revenues from both corporate functions and leisure activities including weddings.
There are development opportunities at some of the sites to convert the external buildings.
The geographic fit is good and expands Fuller’s reach. While it already has properties on the periphery of the Cotswolds, this is its first direct foray into the region. The acquisition, funded by existing bank facilities, is expected to add to earnings in the first year.
Fuller’s chief executive Simon Emeny said, ‘Quintessentially English and renowned for a focus on fresh food, premium accommodation and an exceptional level of customer service, this collection of seven iconic country hotels is highly complementary with our existing strategy.’
Emeny said that the current market is polarised, with lots of distressed businesses and only a few high quality assets available for sale, such as the one Fuller’s has just completed.
While the price is attractive at 11.7 times earnings before interest, tax, depreciation and amortisation (EBITDA) the most important element of the transaction for both buyer and seller was that the properties enhance Fuller’s existing portfolio very well.
