S&N and 6C in pubs merger talks

Related tags Public house Hotel Six continents

Six Continents, the hotel and pub operator, has held talks with Scottish and Newcastle, Britain's biggest brewer, to create a £4.5bn pub company by...

Six Continents, the hotel and pub operator, has held talks with Scottish and Newcastle, Britain's biggest brewer, to create a £4.5bn pub company by merging their two estates and floating the spin-off on the stock market.

Talks over the deal involving the chief executives of the two companies, Tim Clarke and Brian Stewart have been ongoing for three months, are understood to have ground to a halt two weeks ago.

It is thought the talks stumbled over S&N's desire to retain control of beer sale through its pub estate. Nearly 10 per cent of the brewer's sales goes through its estate. The Six Continents estate currently gets its beer from Interbrew.

"We've heard the whole thing is off but not necessarily forever," said one City analyst. "It would be a very good deal for both companies. The City says S&N should concentrate on brewing and 6C, on running hotels - clearly this would solve that.

"As we understand it the issues that brought the talks to a standstill are things that can be solved."

The 6C pub portfolio includes brands such as All Bar One, the original wine bar concept, Ember Inns, the premium suburban offering and Harvester, the family-focused budget pub-restaurant.

The S&N branded chains include Bar 38, the style-bar brand, Chef & Brewer, the quality pub restaurant and John Barras, the community local.

The merged business would have 3,400 managed pubs and sales of about £2.4bn. Schroder Salomon Smith Barney has been advising Six Continents on the talks while UBS Warburg has been supporting S&N.

It is thought any new business would have comprised two divisions, pub-restaurants and food-led outlets in one, and pubs and bars in the other.

The two companies have been selling off their tenanted estate to focus on managed, although S&N have continued to run a large chunk of the tenanted business through a sale-and-leaseback arrangement with Royal Bank of Scotland.

Six Continents sold close to a thousand pubs to Nomura last year. This package become Voyager and has since been sold on to a consortium led by Enterprise Inns and backed by Cinven.

By demerging its pubs division, Six Continents hoped to unlock shareholder value. Shareholders want the company to hand back cash or make an earnings enhancing hotels acquisition.

S&N is thought to be considering a sale-and-leaseback of it managed houses as alternative to a merger or trade sale.

Six Continents (6C) is currently valued at £6.6bn and S&N, £4bn.

Related topics Beer

Property of the week

Follow us

Pub Trade Guides

View more