Acquisitive pub group Stonegate this morning busted its most dramatic move yet after agreeing to buy Ei Group in a £1.3 billion deal that changes the face of the UK pub market.
The combined business will operate around 5,000 pubs and positions Stonegate as the UK’s largest pub group.
The deal is all the more remarkable for the fact that Stonegate only came into existence nine years ago when it purchased 333 pubs from Mitchells & Butlers.
Since then the firm, which today operates 765 sites, has grown in size and scale through a series of strategic acquisitions.
The deal values Ei Group – formerly known as Enterprise Inns – at 38% more than its closing share price yesterday evening and represents a multiple of approximately 11.4 times its underlying EBITDA of £261m for its last financial year.
Stonegate sees the takeover as a way to build scale and diversification so that it can compete more effectively in what it expects to be a challenging operating environment in the foreseeable future.
Ian Payne, chairman of Stonegate, said it was an “exciting prospect” to bring the two businesses together to create a diversified pubs group with significant industry expertise.
“At Stonegate, we have an established track record of running successful pubs throughout the UK – with over £350m having been spent on capital expenditure at Stonegate since it began trading in November 2010. We plan to leverage our existing managed house infrastructure, portfolio of formats and access to capital and invest in the combined estate for the benefit of all stakeholders.”
Robert Walker, chairman of EIG, described the commercial benefits of combining the companies as “compelling”.
He reasoned: “Stonegate is committed to continuing to invest in the business for the future benefit of the combined business, tenants and employees. The EIG Board believes that this is a combination it can recommend with confidence to shareholders and stakeholders alike.”
Ei Group is currently the largest owner of pubs in the UK with over 4,000 properties across England and Wales. It has three business units: Publican Partnerships, Managed Pubs and Commercial Properties.