S&N sale prompts turbulent time on the high street

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The UK's 14,000 managed houses face turbulent times with a record number of pubs up for sale and more companies facing collapse.This week Scottish...

The UK's 14,000 managed houses face turbulent times with a record number of pubs up for sale and more companies facing collapse.

This week Scottish & Newcastle (S&N) announced the sale of its entire 1,450-strong managed estate. Britain's biggest brewer is quitting pubs to focus on growing its global beer business.

The sale means a raft of household pub brands, including Chef & Brewer, Henry's, John Barras and T&J Bernard, will go under the auctioneer's hammer.

S&N will use the £2.3bn cash from the sale to finance brewing acquisitions, with Carlsberg said to be its first target.

At the same time, niche bar operator Po Na Na appeared on the brink of collapse amid fears it had run out of cash, thanks to loss-making outlets dragging the company down. If it falls, it will follow Old Monk and Brannigans' operator Mustard into administration.

A further 2,050 pubs belonging to Mitchells & Butlers (M&B) could also change hands over the summer.

The company, which has brands such as Ember Inns, Harvester and Toby Carvery, is the former managed pub division of Six Continents. It was floated separately on the stock market and several predators are said to be circling the company.

BC Partners, a company that specialises in buying and selling companies for profit, recently made a £2.8bn offer for M&B. The bid was rejected and now BC Partners may focus on S&N.

Other companies in the market for managed house deals include CVC, Laurel Pub Company, Japanese bank Nomura, Spirit Group and its parent company Texas Pacific.

Neil Gillis, managing director of Greene King Pub Company, said: "I think this is two different things. There is the continued demise of the high street, where essentially there is too much capacity. The S&N situation is different - this is the last vestige of the big brewers getting out of managed houses."

Giles Thorley, chief executive of Punch Taverns, said: "I suppose all of these situations provide opportunities for someone else. There will undoubtedly be some pubs from S&N and M&B that will be converted to lease. How that happens, I'm not sure."

Managed houses in town centres have faced tough trading times. Economic uncertainty plus a saturation of outlets has led to widespread price discounting. A period of natural selection has seen some businesses collapse.

The future of SFI Group, operator of Bar Med, Litten Tree and Slug & Lettuce, remains uncertain. Its shares were suspended last year amid a cash crisis.

There have also been profit warnings from Eldridge Pope, Hartford Group, JD Wetherspoon, and Luminar.

"Some areas of the managed pub sector are doing fine," said analyst Douglas Jack of WestLB Panmure. "The pub-restaurant market is fairly resilient and the food sector is still growing quite strongly as seen by Whitbread's results.

"The high street is mixed. We may see more companies fall as banks lose patience."

Related articles:

Po Na Na suspends shares (29 April 2003)

S&N to quit pub sector (28 April 2003)

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