Mitchells & Butlers sells 333 pubs to private equity firm
Mitchells & Butlers has taken another step in its strategy of selling off non-core, wet-led pubs by announcing it has agreed to dispose of 333 sites for £373m to a private equity firm.
The Stonegate Pub Company, backed by private investment firm TDR Capital, has bought the pubs, which include Scream bars, high street venues and community pubs.
TDR, which was founded in 2002 by pub deal veterans Manjit Dale and Stephen Robertson, said prospective names for a management team for Stonegate were being drawn up and an announcement would be made once the deal had completed. Dale was a member of the team at Bankers Trust which orginally backed the creation of Punch Taverns in 1997.
The sold sites earned £52m in M&B's last financial year, and an operating profit of £35m. The EBITDA multiple was 7.2 times on the gross proceeds figure.
The deal was done at what one observer noted was "a very attractive price", being a 15 per cent discount to the pubs' net asset value.
Subject to shareholder approval the deal will complete in November.
The move is part of M&B's long term strategy to move away from drink-led operations in order to focus on what it believes will be the future for the hospitality market, namely food-led establishments.
M&B's chairman John Lovering said he was delighted with the progress the group was making on reshaping the business, which will see the group open more pub restaurant-style sites near or on leisure parks.
"The cash resources realised by the sale programme will allow the company to accelerate its growth into the informal eating out market," he added.
M&B said the latest deal means it has realised half a billion pounds from recent sales of non-core assets.
A spokesman for TDR Capital said the deal was a good one for both sides. "M&B has realised cash to help reduce its debt and continue its focus on food-led pubs, while TDR has got 333 pubs at a good price."
Noting the renewed interest of private equity firms in the pub trade, Peter Hansen, whose Sapient Corporate Finance group handled the sale for M&B, said: "Multiples are coming down to a level which makes sense for private equity firms, and they are coming back into the sector."
Once the Stonegate deal goes through M&B said it will have 1,580 "restaurants and food-led pubs with higher growth potential".
M&B's shares were down one per cent at 293p.
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The pubs sold are:
52 Scream bars
71 music and late night venues
75 unbranded town centre pubs
67 community pubs
68 other, smaller pubs
Around 20 per cent are on short leases, the rest are either long leaseholds or freeholds. A third of the total sites are located in the South of England, 38 per cent in the Midlands, with the rest spread across the UK.
M&B said the deal, once approved, would initially be earnings dilutive. But it believed that investment of funds from the sale would provide "higher growth opportunities at attractive returns".
In the unlikely event the deal does not get the nod from M&B shareholders, the group will have to pay TDR a 'break fee' of £12m. If TDR doesn't go through with the deal, it will have to pay M&B a 'break fee' of £18m.
