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Stonegate settles tab for EI acquisition
Posted on Thursday, 18 July 2019 12:56
Stonegate Pub Company, the owner behind bar chain Slug & Lettuce, has agreed to buy UK-based pub operator Ei Group for an enterprise value of GBP 2.97 billion in cash.

The acquiror is offering GBP 2.85 per stock, which values the entire share capital at GBP 1.27 billion, representing a premium of 39.0 per cent to the target’s close of GBP 2.05 on 17th July, the last trading day prior to the deal being announced.

Following news of the transaction, Ei’s stock rose by 41.0 per cent to peak at GBP 2.89 at 08:07 earlier today.

The deal represents a multiple of 11.4x the pub operator’s underlying earnings before interest, taxes, depreciation and amortisation of GBP 261.00 million for the financial year ended 30th September 2018.

Subject to shareholder approval and regulatory clearance from the Financial Conduct Authority, among others, the acquisition is due to complete in the first quarter of 2020.

Stonegate will fund the transaction through a combination of equity and committed financing.

Headquartered in Solihull, Ei is billed as the largest owner of pubs in the UK, with over 1,800 employees and 4,400 establishments on its books.

It operates through three business units, namely publican partnerships, managed pubs and commercial properties.

The group has invested more than GBP 250.00 million into sites across England and Wales and has total property assets of GBP 3.28 billion.

For the six months ended 31st March 2019, Ei generated revenue of GBP 353.00 million, up 7.0 per cent from GBP 330.00 million in the corresponding period of 2018.

Ian Payne, chairman of the acquiror, said: “At Stonegate, we have an established track record of running successful pubs throughout the UK - with over GBP 350.00 million 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.”

According to Zephyr, the M&A database published by Bureau van Dijk, there have been 36 deals targeting drinking places (alcoholic beverages) providers announced worldwide since the beginning of 2019.

Interestingly, the largest of these involved another UK-based company as Young & CO’s Brewery bought Redcomb Pubs for GBP 34.00 million.

© Zephus Ltd