Marston's to raise £176m to fund new pubs
Brewer and pub operator Marston's hopes to raise £176m through the issue of 299m new shares to fund the opening of around 30 new build pubs.
It is offering investors the chance to buy 11 shares for every 10 they own at a price of 59p — a 39.6% discount on the closing price of 140.25p yesterday.
The company will use approximately £140m of the money to acquire and develop new build pubs, which focus on the "F-plan" — food, families, females and forty/fifty somethings, with a focus on value. Marston's has built 30 new pubs in the past five years achieving an average 15% ebitda (earnings before tax, interest, tax, depreciation and amoritisation) return on investment.
"The current market environment is creating many opportunities for the Company to secure attractive sites on more competitive terms and benefit from falls in average development costs," said chief executive Ralph Findlay.
"The Board estimates that the accelerated programme will deliver around 20 to 25 new pub openings a year in the short term. 15 are expected to be delivered in the first full year to 2 October 2010 with additional sites being added to the land bank for future development."
The remainder of the raised money will be used to buy back some of its securitised debt.
Current trading
Marston's reported that trade for the 16 weeks to 6 June had been "encouraging". Like-for-like sales at its managed division, Marston's Inns and Taverns, were up 1.1% on last year.
Trade at its tenanted and leased division, Marston's Pub Company, have stabilised and are in line with its half year results. Profit before tax and exceptionals is expected to not be less than £69m.
"The current market environment represents a rare opportunity to secure excellent sites on attractive terms," said Findlay. "The roll-out of new build pubs can generate higher returns at lower risk than acquiring mixed packages of existing pubs and is important to our long term strategy to drive shareholder value.
"We temporarily slowed our new build programme in late 2008 in response to the economic and financial challenges facing the industry.
"The Rights Issue will allow us to take advantage of situations arising in the current economic climate and accelerate the roll-out of the new build pubs in attractive locations at attractive investment costs.
"The Rights Issue will also provide the financial flexibility to allow us to consider opportune repurchases of our debt or, if opportunities arise, to make acquisitions of high quality assets at attractive prices."
