Pub closure fears sour Greene King sale
Li Ka-shing’s $4.6bn swoop for the brewer will ‘almost certainly’ lead to cuts, says chief of nightclub chain
FEARS have been raised that Greene King’s shock sale to one of Asia’s richest families is “almost certain” to result in pubs being shut and could lead to the sale of its famous Bury St Edmunds brewery.
CK Asset, part of an empire built by 91-year-old billionaire Li Ka-shing, struck a £4.6bn deal on Monday to buy the 220-year-old Suffolk brewer. The swoop was at a premium of more than 50pc of Greene King’s share price.
Despite written assurances from CK Asset that there would be “no material” job cuts or changes to strategy, the deal sparked immediate concern that the prospective new owners would want to quickly recoup some of that premium.
Peter Marks, the boss of Deltic, Britain’s biggest nightclub chain, believes that once the deal is completed, Greene King’s new Hong Kong owners could soon be ringing in the changes.
He said they would be “almost certainly going to consider” plans such as selling freeholds, selling the pub operating company or turning some tenanted pubs into managed ones.
CK Asset may also feel the need to close one of Greene King’s two main offices in Bury St Edmunds or Burton upon Trent, he said.
The comments by Mr Marks, who, with more than three decades of experience running bars and clubs is seen as one of the leisure sector’s most influential voices, come after unions demanded reassurances over job security, pay and employment conditions.
Unite said that the sale could have “major ramifications” for Greene King’s 38,000 workers.
Beer groups were also unnerved. The Campaign for Real Ale (Camra) labelled it “very concerning for our beer scene”.
The Greene King sale, which will need to be approved by shareholders, comes as pubgoers have been spooked by corporate activity that some say threatens the future of the traditional British local.
Last month Ei, the owner of Britain’s biggest pub estate, agreed to a takeover by Slug & Lettuce and Walkabout owner Stonegate in a deal worth £3bn.
Meanwhile, London Pride brewer Fuller’s sold off its Chiswick operations to Japanese giant Asahi earlier this year. With the Fuller’s sell-off fresh in the memory, speculation has mounted that CK Asset may explore similar plans for Greene King’s brewing operations in Suffolk, the roots of which go back to 1799.
One pub group chief executive warned that such a strategy “would run the risk of undermining” the Greene King brand.
“The value of authenticity and heritage that comes from the Greene King history,” the person said. “The value of the Greene King brand should not be underestimated.”
Greene King’s dual-headquarters structure, in Bury and Burton, is a legacy of its £774m takeover of Spirit Pub Company in 2014. The executive saw no reason for this to be changed, saying that Greene King has thus far “found a need” for both sites.
Another pub chief executive said: “Obviously the weakness of sterling makes such assets relatively attractive, [but] I have no reason at this stage to suppose that they will not continue with the business as is.”
Meanwhile, Tim Martin, the boss of Wetherspoon, said he did not think the Li family were looking to turn a quick profit.
“Since they own Superdrug and employ a lot of people … I suspect they’ll stick around for a few decades,” he said.
Boris Johnson has been drinking in the wrong pubs. While the Prime Minister was sharing a pint with shouty Wetherspoon boss Tim Martin last month, the chain’s far bigger rival, Greene King, was in talks to be sold to Hong Kong mega-billionaire Li Ka-shing.
The takeover immediately raised fears about job cuts and pub closures at a company that employs a whopping 38,000 people at 2,700 boozers and has been around since 1799.
Yet, Greene King’s fate is unlikely to grab the attention of ministers. Indeed, it is telling that as Li’s CKA group was finalising the details of its £4.5bn swoop, Johnson was wasting his time listening to Martin bang on incoherently about Brexit again.
One of Theresa May’s big pledges when she took office was that the UK would finally have something resembling a sound industrial strategy. Instead, three years of Brexit politics consigned that promise – and many others such as tackling inequality – quickly to the dustbin. Sadly, there seems little hope of the Government coming up with a more convincing strategy. While ministers continue to be utterly consumed by our looming departure from the European Union, it seems to have escaped their attention that foreign buyers and private equity are picking off British plc at the rate of roughly one a fortnight.
If anyone has noticed, then we are likely to hear the usual nonsense about how the sudden interest from investors is a vote of confidence in Brexit Britain.
Don’t be fooled. The reason for this sudden rash of deals is simple: the
cheap pound, and another unintended consequence of Brexit – bombed out share prices. Sure it is a sign that buyers are confident in the economy once we leave but this isn’t real long-term foreign investment; what it really means is savvy funds have spotted an opportunity to make a quick buck.
It can be no coincidence that the Hong Kong outfit can afford to open the bidding for Greene King with a juicy 50pc premium. Sterling has dropped 17pc against the Hong Kong dollar since the referendum. Similarly, the pound has fallen 18pc against the US dollar and 16pc versus the euro, explaining why UK companies have suddenly been falling like dominoes.
CKA has made a loose pledge to protect Greene King’s headquarters in Bury St Edmunds but, as the UK learnt to its great cost when Kraft reneged on promises to preserve the illustrious Cadbury heritage, such statements aren’t worth the paper they are written on. Who seriously thinks that defence supplier Cobham will look the same once it emerges from the hands of private equity firm Advent in a few years? Experts are already talking about the likelihood of a quick break-up.
Does any rational person really think Li Ka-shing believes in the long-term future of Britain’s dwindling pub trade? In recent years, pubs have been closing at a rate of one every 12 hours. The number of small pubs has almost halved since 2001. Almost 1,000 closed down in 2017 alone.
Greene King owns the freehold to more than four fifths of its properties and the value of its entire estate was recently revised from £3.6bn to £4.6bn, which is precisely the same price tag that CKA has slapped on the entire company. Uncanny.
As for the future of its two breweries, which produce popular ales such as Old Speckled Hen, one only has to look to another rival Fuller’s to see what the future could hold. Its brewing arm was recently sold to Japanese firm Asahi for £250m because it contributed just 10pc to the bottom line.
Watching silently while large swathes of corporate Britain are flogged on the cheap to the highest bidder is not a proper industrial policy. It is industrial sabotage.
‘It’s not real investment … savvy funds spotted an opportunity to make a quick buck’
Steel purchase is tarnished
The fate of British Steel is another reminder of the folly of selling to the highest bidder. The chequered track record of Knightsbridge financiers Greybull should have prevented it being allowed to own such a major UK asset, never mind one with such a challenged future.
Three years later, an equally questionable owner in the form of the Turkish army’s retirement fund is being lined up after Greybull’s buyout ended disastrously.
The track record of Turkey’s authoritarian government alone should be enough for the Government to think twice about this deal.