It is thought that Cerberus is to make more funds available to Admiral’s management team led by executive chairman Jonathan Paveley to make strategic acquisitions going forward, potentially including group transactions.
The transaction brings to an end Lloyds association with Admiral, providing a complete debt and equity exit. The bank has been a shareholder in the company since a refinancing of the business in November 2009.
Admiral said that the deal represented the launch of a new phase in the development of its business, marking the culmination of a three-year transformation of the group, which has seen it dispose of more than 800 non-core pubs.
The existing senior management team – Paveley, managing director Kevin Georgel, property and strategy director Andy Clifford and chief financial officer Glenn Pearson – will continue to lead the business and guide its on-going growth and development.
Headquartered in New York City with affiliate and/or advisory offices throughout the US, Europe and Asia, Cerberus is one of the world’s leading private investment firms with interests spanning multiple industries including banking and finance, leisure, manufacturing and real estate, and has over $20bn under management.
Paveley said: “This is a great transaction for Admiral Taverns and a tremendous start to 2013. We are delighted that Cerberus has chosen to invest in Admiral and that it recognises Admiral’s future potential. Cerberus’s support will help Admiral develop the business further and strengthen its reputation among pub licensees as the best tenanted pub group in the country.”
Senior managing director at Cerberus, Lee Millstein, said: “Admiral has one of the strongest management teams in the UK leisure industry and we are pleased to be working with them. Their successful transformation of the Admiral business into a leading UK pub group has put the business on an upward trajectory. Admiral's business provides an ideal platform for the acquisition of additional tenanted pubs in the UK, and we look forward to working with the company’s management team and employees to grow the company.”
Paveley added: “Throughout this process, our over-arching aim has been to maintain our day-to-day support of our licensees and ensure continued smooth operations for our staff and our supply partners, and it’s pleasing to have achieved this.”
The deal comes three years after Admiral underwent a debt-for-equity swap that saw its debt burden decline by £600m with the Lloyds taking a majority stake in the business in return.
The debt-for-equity swap left the group with debt of around £350m, which it announced in January last year had been cut by almost £200m in 18 months, helped by improved profits and the sale of under-performing pubs.
The company was founded in 2003 by property developer Gary Landesberg and at one point encompassed 2,000 pubs, but it fell into administration after an aggressive acquisition strategy left it with nearly £1bn of debt, which it was unable to service.
Since the administration, the group’s fortunes have improved under the new management team reporting EBITDA of c£27m in its most recent year.
Lloyds Banking Group and the Admiral Taverns management were advised by PWC, while Cerberus was advised by Sapient Corporate Finance.