UK pubs operator Greene King agrees to 4.6 bln pounds Hong Kong offer
* CKA offer values Greene King at 850p/share
* Offer is premium of about 51% to Friday's close
(Adds graphic, detail on bid and background on previous M&A in
By Samantha Machado and Muvija M
Aug 19 (Reuters) - British pubs operator Greene King
has agreed to a 4.6 billion pounds ($5.6 billion) bid from a
Hong Kong-listed company founded by the territory's richest man
Li Ka-Shing, which said it was seeking to increase its UK
presence even as Brexit looms.
The offer from CK Asset, whose founder ranks among
Asia's best-known entrepreneurs, values shares in the brewer of
Old Speckled Hen and Abbot Ale at 850 pence each or 2.7 billion
pounds in total, a premium of about 51% to their Friday close.
Including debt the deal value amounts to 4.6 billion pounds,
though some analysts said the cash value should be higher.
"We would see 950p per share ... as a more attractive exit
price to secure shareholder consent," said Shore Capital
analysts, noting that underlying trading had improved lately.
CKA already owns a near 3% stake in Greene King, also owner
of the Chef & Brewer and Hungry Horse chains and whose shares
jumped 51% to match the bid price.
The proposed takeover comes after Greene King, with 2,700
pubs, restaurants and hotels across the UK, has like others
struggled with a rise in the minimum wage and a move away from
pub drinking among younger Britons.
Britain's looming exit from the European Union risks denting
the economy but in the meantime the weakness of sterling has
made it cheaper for foreign buyers to snap up UK assets.
More than 11,000 pubs shut in the UK in the last decade, a
fall of almost a quarter, a 2018 analysis by Office for National
Statistics had revealed. (https://bit.ly/2DV3793)
However, Greene King, which replaced its long-time boss last
year, in June posted a higher than expected 1.6 percent rise in
annual adjusted profit before tax to 246.9 million pounds.
Some saw the move as likely to lead to more pubs closing as
CKA, where Li Ka-shing retired in May as chairman and passed the
role to his eldest son but retains a near 30% stake, looks to
cash in on their property value.
"While it's a bottle of champagne for shareholders, there
may be fewer reasons to celebrate for patrons. I think we can
comfortably expect more pub closures," Markets.com analyst Neil
CKA said its strategy was to look for businesses with stable
and resilient characteristics and strong cash flow.
"The company believes that the United Kingdom pub and
brewing sector shares these characteristics and that pubs will
continue to be an important part of British culture and the
eating and drinking-out market," it said in a statement.
The deal would mark the latest in a series of investments by
Li Ka-shing's business empire in the UK, with holdings in
retailer Superdrug, utilities Northumbrian Water and Wales and
West Gas, and the Port of Felixstow.
It also comes as the sector sees a wave of consolidation.
Slug and Lettuce chain owner Stonegate last month agreed to
buy larger rival Ei Group for 1.27 billion pounds,
while Japanese brewer Asahi Group said it would snap up
the British beer business of Fuller, Smith & Turner.
Greene King's directors intend to unanimously recommend
shareholders vote in favour of the deal, which will be funded
from CKA's existing cash resources.
News of the deal lifted shares in rivals JD Wetherspoon
, Mitchells & Butlers and Marston's by
between 6% and 9%.
($1 = 0.8239 pounds)
(Reporting by Samantha Machado and Muvija M in Bengaluru
Editing by David Holmes)
First Published: 2019-08-19 17:16:27
Updated 2019-08-19 20:29:25
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