Bargain Booze parent company Conviviality Retail's share price leaped this morning after confirming it is buying out wholesaler Matthew Clark for £200m.
The deal, a reverse takeover that will be subject to shareholder approval, is being struck via Conviviality's subsidiary Conviviality Brands, and will create a major player in the industry with a combined annual turnover of more than £1.1bn.
Punch Taverns and Hertford Cellars are each selling their 50 per cent stake in the business for around £100m apiece. The acquisition and associated expenses will be financed by a placing of 86.6m shares at 150p per share, totalling £130m, with a further £80m to be drawn down under new debt facilities.
The share issue is at a 3.2 per cent discount to the closing middle market price of 155p per share on 8 July, the last day before trading in shares was suspended as rumours surfaced of the deal.
On its first day back on trading, Conviviality's share price soared 24 per cent.
Diana Hunter, chief executive of Conviviality, said: “We are pleased to have reached agreement on the acquisition of Matthew Clark as this will accelerate our strategy of expanding our wholesaling expertise into new markets and channels.
"Matthew Clark has a leading position in the independent on-trade market, complementing Conviviality's position in the off-trade, and the team bring significant on-trade wholesaling expertise and an unrivalled portfolio of high quality and loyal customers.
“By operating a delivered wholesale model we can serve a diverse range of customers and build our wine and spirit volumes further while simultaneously strengthening our retail channel. The acquisition will create a major player in the UK drinks wholesale market, and we believe that combining the two businesses will give rise to significant potential synergies, which will drive increased returns for Conviviality's shareholders.”
Duncan Garrood, chief executive of Punch Taverns, added: "We are pleased to have agreed the disposal of our investment in Matthew Clark and at a significant premium to our current book value. The sale of a non-core business will enhance our financial flexibility to pursue our strategic objectives for our core activities. At the same time, we will enter into a 10 year drinks supply agreement with Matthew Clark for the supply of wines and spirits into the Punch estate."
Zeus Capital and Investec Bank are acting for Conviviality Retail.