Mitchells & Butlers buys 173 Orchid pubs

By John Harrington

- Last updated on GMT

Related tags: English-language films, M&b

Mitchells & Butlers has bought the bulk of the Orchid estate
Mitchells & Butlers has bought the bulk of the Orchid estate
Mitchells & Butlers (M&B) has announced that it has acquired the majority of Orchid’s estate, consisting of 173 sites, in addition to Orchid’s head office, for £266m.

M&B said it plans to convert 96 to its brands over a two year period, focusing on concepts such as Harvester, Toby Carvery, Ember, Miller & Carter, Castle and Vintage Inns.

The managed operator said it intends to add 77 of the pubs to its Heartland portfolio. “Many of these sites have recently received investment and will be able to continue trading at their current strong sales and profit levels, further benefiting from purchasing synergies as a part of the enlarged M&B group. A small number may be considered for disposal.”

Capex in the sites will total c£35m over the next two year, M&B said, “generating strong incremental returns”.

“This conversion programme will complement M&B’s existing expansion plan over the same time period.”

The deal offers cost savings of at least £6m per year available from rationalisation of support functions and combination of purchasing. M&B said it expects double digit earnings enhancement with returns well ahead of cost of capital.

Alistair Darby, chief executive of M&B, said: “The acquisition of the majority of the Orchid estate will accelerate M&B’s’ growth and present significant opportunities for value creation through cost savings, synergies and the conversion of Orchid pubs to M&B brands. We greatly look forward to welcoming the Orchid employees who will transfer as a consequence of this acquisition.”

Under the deal, the owners of Orchid have retained a number of leasehold sites. As M&B has acquired the Orchid head office function, it has agreed to provide services to these sites for up to 15 months.

M&B said the deal offers an opportunity for significant increases in sales and margin. Average sales per week at M&B sites are £22.7k, compared to £15.3k for the acquired sites.

Related topics: Mitchells & Butlers

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