C&C pre­par­ing ¤1bn bid for UK pub group

Bid­ding war ex­pected after Spirit Pub Co re­jects ini­tial of­fer from Ir­ish cider maker Pub group Greene King made of­fer for Spirit last month of some £660m

The Irish Times - Friday - The Ticket - - FRONT PAGE - MARK PAUL

C&C, the Tip­per­ary-based maker of Mag­n­ers and Bul­mers cider, is be­lieved to be pre­par­ing a fresh bid for a UK-listed group of more than 1,200 pubs in an of­fer that may end up top­ping ¤1 bil­lion.

Spirit Pub Company, which is cur­rently sub­ject to an of­fer of around £723 mil­lion (¤916m) from ri­val pub group Greene King, last night an­nounced it had re­jected an ini­tial ri­val of­fer from C&C.

It was spec­u­lated in the UK last night that C&C had bid in the re­gion of £760 mil­lion. Greene King made an of­fer last month for Spirit of about £660 mil­lion.

With debt the £760 mil­lion of­fer from C&C would at­tribute an en­ter­prise value to Spirit of £1.4 bil­lion.

Pub group

It is un­der­stood that C&C, which sources say has been on the look­out for a pub group in the UK to give it a route to mar­ket for its drinks brands, only be­came in­volved after Greene King made its first of­fer. The Ir­ish company is be­ing ad­vised by Roth­schild.

C&C was un­der­stood to be last night pre­par­ing a state­ment con­firm­ing it wants to buy Spirit and lay­ing out the ra­tio­nale for the deal.

Spirit con­firmed the bid from C&C to the London Stock Ex­change after mar­kets closed last night, and said C&C had un­til Novem­ber 20th to say whether it would make a new of­fer or de­sist: com­monly known as a “put up or shut up” dead­line.

Spirit, large parts of which were once owned by Scot­tish & New­cas­tle (S&N), has an es­tate of more than 750 branded pubs and a fur­ther 450 or so leased out­lets.

Its brands in­clude Fayre and Square, Flaming Grill Pubs, John Bar­ras Pub Company, and Wacky Ware­house. The group had rev­enues last year of about £758 mil­lion.

If C&C were to snatch Spirit from un­der the nose of Greene King it would rep­re­sent a sig­nif­i­cant coup for the Ir­ish company’s man­age­ment team, led by highly-re­garded for­mer S&N ex­ec­u­tive Stephen Glancey.

Sev­eral of C&C’s top man­age­ment, in­clud­ing Mr Glancey and also the group chair­man Brian Ste­wart, are al­ready fa­mil­iar with the Spirit es­tate of pubs as S&N owned many of them un­til 2003. S&N was later bought by Heineken, although Spirit is now an inde- pen­dent listed company.

Part of the ra­tio­nale for the deal be­ing dis­cussed in­ter­nally within C&C is that the Ir­ish company is highly cash gen­er­a­tive, which would dove­tail well with the fi­nanc­ing model of the pubs, which are fi­nanced with long-term debt.

C&C was last night also pre­par­ing to tell its share­hold­ers that a deal with Spirit would help it ce­ment a “ver­ti­cally-in­te­grated” model. Many pub groups in the UK are or were once owned by drinks com­pa­nies which use them as dis­tri­bu­tion out­lets for their brands.

“It would be a shop win­dow for C&C’s prod­ucts,” said a source close to the company.

As well as Bul­mers/Mag­n­ers, C&C also owns the Scot­tish lager brand Ten­nents, Gaymers cider, Hornsby’s, Black­thorn and Ye Olde English cider.

It is be­lieved among C&C’s se­nior man­age­ment that if it suc­cess­fully de­vel­ops a ver­ti­cally-in­te­grated model C&C may also be­come at­trac­tive to Asian brew­ers look­ing for com­mer­cial deals for dis­tri­bu­tion routes into the UK.

Ir­ish mar­ket

In the Ir­ish mar­ket C&C al­ready has an el­e­ment of ver­ti­cal in­te­gra­tion through its pur­chase of drinks dis­tri­bu­tion company Gleesons, for which it paid ¤58 mil­lion. In Scot­land it this year pur­chased the part of Wal­lace’s Ex­press, a wine and spir­its whole­saler, that it did not al­ready own.

Mr Glancey took over as chief ex­ec­u­tive of C&C in 2011. He has since over­seen an am­bi­tious ex­pan­sion, in­clud­ing mak­ing a big bet on the grow­ing US cider mar­ket with the pur­chase of the Ver­mont Hard Cider Company, which it bought for $305 mil­lion.

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