Stonegate and Town & City merge

Stonegate Pub Company and Town & City Pub Company have merged with the enlarged company taking on the Stonegate name, the Publican's Morning Advertiser understands.

Stonegate, backed by private equity firm TDR Capital, completed the acquisition of 333 Mitchells & Butlers wet-led pubs last year and has now merged with Yates's operator Town & City to create a 550-strong managed company. Its brands include Slug & Lettuce.

The deal has been under discussion for eight months and the merger turns Stonegate into the UK's fifth largest managed pub company. Its estate size means that it creates a serious rival for JD Wetherspoon in terms of high street presence.

Ian Payne has been carrying out the de facto role of executive chairman at Stonegate while the merger talks went on. He has recruited Graham Jones as chief operating officer of Stonegate. But it is thought the two senior executives at Town & City, chief executive Toby Smith and commercial director Suzanne Baker, transfer to Stonegate in similar positions.

Icelandic bank Kaupthing was still the largest shareholder in Town & City with Commerzbank — the main debt provider to the business — holding about 30% of the equity. Stonegate has made good progress this year and finished debranding 78 sites trading formerly as Mitchells & Butlers brands. This included the debranding of 60 Ember Inns and Sizzling Pub Company sites, which are trading under their original pub names. The company has also converted nine of the 10 O'Neill's that it bought to Molloy's and converted the last site to an unbranded pub called the Melbourne. Stonegate is re-positioning the Scream student brand with two trial sites due to open — one in Edgbaston, West Midlands, and one in Leicester.

The firm is planning to evolve the 1970s-themed Flares and 1980s-themed Reflex brands. Earlier this week Stonegate unveiled a "limitless" bonus scheme for assistant managers. Payne told Stonegate's 180 assistant managers this week that while the trading environment remained challenging, current Stonegate figures were very encouraging. "I am delighted that you are grasping the opportunities to increase sales in your businesses with your managers," he told them.