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Stonegate could ‘possibly improve’ drinks range across Ei Group

By Nicholas Robinson contact

- Last updated on GMT

Stepping stones: industry spectator gives notes on the biggest pub deal of 2019
Stepping stones: industry spectator gives notes on the biggest pub deal of 2019
Stonegate’s intention to buy Ei Group for £1.27bn could make the latter business stronger than ever under the leadership of boss Simon Longbottom, one industry spectator has ventured.

Longbottom has managed to build one of the best managed operations in the UK on-trade, according to former Punch managing director Paul Pavli who, in an exclusive interview with The Morning Advertiser​, has said the deal announced earlier this month​ could lead to an “exciting time ahead”.

Since the £1.27bn acquisition was revealed on 18 July, Longbottom has said little about Stonegate’s plans for Ei’s portfolio of managed and tenanted and leased (T&L) operations, other than an intention to invest​.

The deal, which will only go ahead with Ei shareholder and competition authority approval, will see Stonegate become the UK’s biggest pubco with more than 4,000 sites compared to its current 760.

“I don’t really see Stonegate as a small operator. To me, they are one of the best managed operators with the backing of their owners making them a big player,” said Pavli. 

Leased and tenanted sites

“What this [deal] says to me is that the pub industry is a great place to invest, somewhere innovation often starts, especially in the leased and tenanted estates.

“This looks like a really good deal for Ei Group shareholders and a great deal for Stonegate – an exciting time ahead.”

Potential challenges following the acquisition would easily be dampened down by Stonegate’s experienced management team, which has a history of dealing with big buyouts, said Pavli.

It was likely Stonegate would bring new ways of thinking to Ei’s T&L sites, with significant investment powers to make big changes.

“This [move] is no different to the T&L guys starting managed estates over the past few years,” continued Pavli.

“The skills the T&L guys were missing were the managed house principles. While Stonegate hasn’t run T&L pubs, the leadership team in that business have bags of T&L experience, so I’m sure they will do it well.

“They are going to have to tweak a few ways of working, but let’s not forget they have a history in investing in pubs and that’s what some of these pubs will need, so Stonegate is well placed to do it.”

How many Ei sites may be sold?

Some of the concerns that have been raised about the acquisition is around how many of Ei’s T&L sites Stonegate could be sold, with Pavli believing there to be a possibility of such a circumstance to see the deal go through the Competition and Markets Authority (CMA).

“Only they [Stonegate] will know the official numbers they need to sell to get the deal through the CMA, but these are high-quality pubs and will enhance another pub company’s T&L estate when they are sold.”

However, there has been little concern in the trade about the Stonegate’s ability to manage a larger estate, with many queries instead surrounding the future drinks offer across Ei’s sites.

“My view is that Stonegate already have great buying power,” added Pavli. “They will be able to maximise this with a bigger estate and possibly improve the range available across both sets of pubs.

“But let’s not forget that the biggest share of drinks sold in those pubs are already available in both businesses and I don’t see this changing much.”

Related topics: Ei Group, Other operators

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