Investors raised a glass to Greene King after the pub and brewery group agreed to be taken over by Hong Kong’s richest man in a £2.7bn deal.
Shares shot up more than 50 per cent yesterday following the announcement that a subsidiary of CK Asset Holdings (CKA) will buy the entirety of Greene King’s shares at 850p per share, in one of the year’s biggest deals so far.
The deal values Greene King, Britain’s largest pub retailer and brewer, at £4.6bn including net debt, making it the second-biggest UK-inbound deal of the year after Blackstone and the Canada Pension Plan Investment Board made a £6bn move for Alton Towers owner Merlin Entertainments.
The all-cash offer represents a 51 per cent premium on Friday’s closing price of 563p per share.
CKA was founded by 91-year-old Hong Kong tycoon Li Ka-shing and is run by his eldest son, Victor Li Tzar-kuoi. Li announced plans to retire last year, but remains a senior adviser at CKA.
Greene King operates 2,900 pubs, restaurants and hotels across the UK, meaning that the £2.7bn deal equates to just under £1m per site.
Citigroup and Rothschild are advising Greene King on the deal, with HSBC acting for the Hong Kong-based conglomerate.
Paul Ruddy, an equity analyst at Goodbody, told City A.M., that while CKA might convert some of the properties, he expected the majority would remain as pubs. “I would guess there are bits of the estate they could look to diversify, but on the face of it I would be surprised if they repurposed all of the properties,” he said.
News of the takeover sent shares in other pub groups soaring, with JD Wetherspoon, Marston’s, and Mitchells & Butlers all closing up. The companies closed up 7.55 per cent, 9.11 per cent, and 5.71 per cent higher, respectively.
In its Greene King takeover proposal, CKA said it was focused on “stable, profitable and cash flow generating businesses that benefit from real estate backing” and believed the UK’s pub and brewing sector “shares these characteristics”.
“The specific attractions of Greene King include its: established position in the UK pub and brewing market; freehold and long leasehold backed property estate; and resilient financial profile,” CKA added.
UBS analyst Zachary Gauge said the deal “appears to demonstrate an appetite to deploy a very large volume of capital into a company with a significant holding of UK real estate, despite the ongoing uncertainty surrounding Brexit.”
The ongoing unrest in Hong Kong could lead to more investors putting assets into the UK, as “the challenges facing the UK property market may be viewed as relatively minor compared to those in the domestic market.”
Greene King chairman Philip Yea said: “The Greene King board is confident in the long term prospects of the business but believes this offer represents a good opportunity for shareholders to realise value for their investment at an attractive premium, while also ensuring the future success of Greene King for employees, partners, customers and suppliers.”
Yea said the board would be “unanimously recommending” the deal to shareholders.