Greene King’s £723m gets it into the Spirit

Oliver Smith
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BREWING giant Greene King has raised its bid for pub chain Spirit Pubs after its previous offer was rebuffed.

Spirit said its board is likely to recommend Greene King’s higher £723.3m bid, which values Spirit at 109.5p per share – a 20 per cent premium to the stock’s closing price on Friday.

“The board of Spirit has indicated to Greene King that it would be willing to recommend an offer at the level of the revised proposal to Spirit shareholders...” said Spirit. The deal, if successful, would create a pub giant with 17,000 managed and retail pubs and around £2bn in revenues.

Spirit Pub last month rejected a £661m takeover approach from Greene King, saying the offer undervalued the company.

“Whilst a revised offer of 109.5p may be lower than some shareholders had hoped for and contains less cash (8p per share), it would appear sufficient for the Spirit board,” said Peel Hunt analyst Nick Batram.

“There are risks associated with a largely share offer in volatile markets but Greene King would have paid a reasonable price and not overburdened the balance sheet with additional debt. Therefore, the bid looks likely to succeed.”

Greene King is shifting its focus to its own-managed retail business, comprising restaurants, hotels and pubs, as it competes for a bigger slice of the dining market. To that end it is reducing its tenanted and leased estate.

Spirit, which was spun out of Punch Taverns in 2011 and runs chains such as Chef & Brewer, Fayre & Square and Flaming Grill, is split into 450 leased pubs and more than 750 managed pubs, with the latter accounting for nearly 90 per cent of the group’s revenue. Both groups also benefit from a larger exposure to the economically stronger London and South East regions of Britain.

In May, Greene King pulled out of talks to buy the majority of pubs owned by rival Orchid Group, which were eventually sold to Mitchells & Butlers for £266m.

Greene King has until 30 October to make a final offer to Spirit. Shares in Spirit rose 9.6 per cent to close at 99.75p, close to its record high.

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