Analysis

What does C&C’s acquisition of Matthew Clark mean for pubs?

By Nicholas Robinson contact

- Last updated on GMT

Questions: what does the buyout of Matthew Clark and Bibendum mean for pubs?
Questions: what does the buyout of Matthew Clark and Bibendum mean for pubs?
Following its acquisition of Matthew Clark and Bibendum, C&C Group is set to revive the parts of the businesses that stalled during former owner Conviviality’s near month-long financial calamity. The big challenge, however, will be restoring faith with customers, especially those hit by the troubles.

Magners cider maker C&C Group threw a lifeline to more than 2,000​ Matthew Clark and Bibendum workers on acquiring the brands and their subsidiaries in a reported £102m deal on Wednesday (4 April).

C&C paid £1 for the two businesses and settled more than half of Conviviality’s £180m net debt to lending banks. Conviviality hit the rocks after a £30m tax bill was discovered, leading the company to embark on a failed attempt to raise £125m from investors​.

The buyer used its relationship with AB InBev (ABI) to secure some of the funding for the acquisition, but it has been made clear ABI will have no control over newly named Matthew Clark Bibendum, which will also function independently of C&C.

It is something C&C looked at in 2016, but the price wasn’t right. Now they have got it for a nominal sum

– Ian Hunter, Investec

A major weight will undoubtedly have been lifted from the shoulders of pubcos reliant on the distributors’ services, with chains such as JD Wetherspoon saying last week​ contingency plans were in place should supply be interrupted.

However, trade went without a hitch for many, if not all, of Matthew Clark’s biggest customers, despite many suppliers to the distributors putting a stop on sales in fear of not being paid.

Matthew Clark and Bibendum supply almost 25,000 pubs, bars, restaurants and hotels, which equity analyst at Investec, Ian Hunter, says will need to have faith restored in the strength of the brands.

“It’s a transformational deal for C&C at an optimistic price,” he told The Morning Advertiser ​(MA​). “It is something C&C looked at in 2016, but the price wasn’t right. Now they have got it for a nominal sum."

‘Working freely’

Hunter continued: “It’s likely C&C will keep Matthew Clark and Bibendum as they are, working freely for the foreseeable future while they try to recover Conviviality’s customers lost over the past few weeks and reassure them there’s cash in the system.

“They need to make sure that the producers [supplying to Matthew Clark Bibendum] know that the business is still viable and then go into recovering smaller pieces they may have lost.”

The backing of ABI would help in restoring some faith among customers and suppliers, considering its scale and financial weight, Hunter believes. “There’s no point in looking for another supplier,” he advises operators.

Other suppliers, however, have jumped on the opportunity to bolster their customer base, according to Heath Ball, licensee of Top 50 Gastropub the Red Lion & Sun, Highgate, north London. “Our supply has been unbroken throughout the issues, even to the point of new listings from our supplier Bibendum,” he says.

I think C&C taking Matthew Clark and Bibendum on will be a good move, a drinks business owning a drinks business can only be a good thing, as long as they leave Bibendum to do what it does

– Heath Ball, licensee

“I think C&C taking Matthew Clark and Bibendum on will be a good move, a drinks business owning a drinks business can only be a good thing, as long as they leave Bibendum to do what it does.”

Heath, who is also the licensee of the Wenlock Arms in Hoxton, north London, stocks premium wines in his gastropub. “At the premium end, we’ve had other suppliers knocking on doors like sharks trying to get business.”

A spokesman for C&C told MA ​companies such as Diageo had put a stop on supply, but assured C&C this would be lifted as soon as it took financial control.

“Getting the industry trusting C&C and believing in the business again is key now,” he says. “Financially, it’s stable and we’ve got ABI backing this and C&C is a bigger business than Conviviality and is an industry player.

“The message out there [from C&C] is 'let’s get going'. There will be a focus on getting the drinks the customers and consumers want to their businesses. 

“Companies like Diageo had put supply on stop, but they will take that stop off,” the spokesman adds.

A spokesperson from Diageo told MA there was a very short halt on supply, but it was now trading with the newly formed company, adding Diageo has a very strong long-term relationship with C&C, Matthew Clark and Bibendum.

He says: "We are shipping to Matthew Clark Bibendum – stock is freely flowing. We look forward to working with the new owners and the incumbent Conviviality team both of whom we know well."

Matthew Clark Bibendum customers

Existing and recent Matthew Clark Bibendum customers will now be the focus for C&C, the company's spokesman says, with C&C set to speak to as many as possible to reassure them of their commitment to supplying the same offer.

“It’s not been taken over by someone who doesn’t understand the trade, C&C is an industry player.”

Late last year, C&C acquired a 47% stake in pubco Admiral Taverns for an equity investment of £37m with US investor Proprium Capital Partners, taking on 845 pubs.

In 2016, the drinks maker signed a bigger marketing and distribution deal with ABI, seeing ABI take on the responsibility of C&C brands including Magners, Blackthorn and Chaplin & Corks.

This acquisition will probably stretch net debt by three times, so they will be looking to bed down and I don’t think they will be buying anything new anytime soon

– Ian Hunter, Investec

The deal was strengthened in February this year, with Orchard Pig, which is now being distributed, sold and marketed by ABI.

“From C&C’s point of view, we’re looking at a company that had little route to market for its strong cider offer in England,” says Hunter. “Now, over the past two to three years, it has gained strong routes.”

The analyst believes C&C will not be on the hunt for more acquisitions, considering the buyout of Matthew Clark and Bibendum was spontaneous.

“This acquisition will probably stretch net debt by three times, so they will be looking to bed down and I don’t think they will be buying anything new anytime soon.”

However, partner and head of consumer retail at Cavendish Corporate Finance Jonathan Buxton believes there will be more upheaval in the alcohol segment.

"As retail markets suffer from declining alcohol consumption, high alcohol taxes and the resulting closure of many traditional pubs throughout the UK, it’s likely that we will see more deals in the sector as it consolidates in a bid to maintain profitability," he says.

Related topics: Wine

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