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Conglomerate buying Greene King reveals why it is prepared to spend £2.7 billion on pub business

Greene King chef

The prospective new owners of Greene King have outlined their reasons for wanting to spend £2.7 billion to take on the UK pub chain.  

CKA Group, which belongs to Hong Kong’s richest family, plans to acquire the Suffolk-based group in a deal that represents a premium of 51% on its share price prior to the announcement.

The move will give CK Group access to a 2,700 pub estate and multiple brands – many of which it already knows well as it has been an owner of a portfolio of pubs which have been leased to Greene King since 2016.

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George Colin Magnus, non-executive chairman designate of CK Bidco – a newly incorporated wholly-owned indirect subsidiary of CKA – explained that the business has strong confidence in the durability of the British pub market.

“CKA’s strategy is to look for businesses with stable and resilient characteristics and strong cash flow generating capabilities. The UK pub and brewing sector shares these characteristics and we believe that this sector will continue to be an important part of British culture and the eating and drinking out market in the long run. Greene King, being a leading integrated pub retailer and brewer with strong real estate backing, is well positioned to capture the opportunities that lie ahead.”

He added: “We are proud of our track record in the UK and our philosophy is to support strong management teams and provide investee companies with access to patient capital in order to create sustainable long-term value.”

Gerald Ma, executive committee member and general manager, corporate business development department of CKA, said there was similarities between both organisations.

“We share the strategy which Greene King has set out in its recent results announcement, that is to focus efforts on developing the brand, enhancing the service offering, training and retaining talent, executing an active estate management strategy, and all under a prudent financial management policy.”

Greene King achieved an operating profit of £368m on turnover of £2.2 billion for the year to 28 April 2019.

Nick Mackenzie, chief executive of Greene King, described CKA as an “experienced UK investor” that “shares many of Greene King’s business philosophies”.

He said: “They understand the strengths of our business and we welcome their commitment to working with the existing management team, evolving the strategy and investing in the business to ensure its continued long term growth.”

New kitchen equipment must pass the stress test for Greene King

Tags : acquisitionCK BidcoCKA GroupGreene KingPubs
Andrew Seymour

The author Andrew Seymour

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