By Razak Musah Baba
LONDON--C&C Group PLC's (CCR.DB) plan to enter into the pub
business may have to be put on hold after Spirit Pub Company PLC
(SPRT.LN) said it has rejected an offer approach from the Irish
brewer.
Following recent press comment, Spirit Pub--which is currently
in talks with fellow U.K. pub company Greene King PLC
(GNK.LN)--confirmed Thursday that it has received a preliminary
approach from C&C regarding a possible offer for Spirit, but
said "it has reviewed the proposal and rejected it."
Known for its Bulmers and Magners cider brands, C&C also
confirmed the approach about a possible offer and didn't give any
financial details but said a combination of the two companies would
provide revenue and savings benefits and a new route to market for
C&C drinks.
Press reports indicated the offer was around 115 pence (185
cents) a share with around a third of it in cash.
But a spokesperson for C&C said the amount offered was
closer to 110 pence and the cash component of the offer was more
than what Greene King PLC (GNK.LN) is offering Spirit Pub, adding
that from a competition standpoint, the combination would give
C&C, which has no pubs in the U.K, the means to a greater route
to market its brand.
The spokesperson added that C&C approached Spirit because it
will be a good fit, and not because C&C is out scouting to buy
a pub company.
Pub firm Spirit has about 1,200 pubs nationwide, 750 of which
are managed, most of which are in London and southeast region
focused. Spirit's portfolio comprises Chef & Brewer, Fayre
& Square pubs and also operates Wacky Warehouse, a soft play,
party venue and activity center for children, as well as Good Night
Inns, a group of hotels situated next to its pub restaurants.
C&C acquiring Spirit would place them well in competition
with brewer/pub firms like Greene King, Marston's PLC and Fuller
Smith & Turner PLC, as well established beer makers like
Heineken NV which owns the Star Pubs & Bars' leased pub
business which is made up of an estate of around 1,250 pubs
throughout the U.K.
Shore Capital's Phil Carroll said the move for a pub business in
the U.K. with a mixed estate of managed and tenanted pubs, some
food led and some wet led, and some with hotel rooms creates a
business with a completely different risk profile.
"It is not necessarily bad but just a very different proposition
that should the situation develop further would require further
assessment," Mr. Carroll said.
Likewise, Nomura's research analysts believes this would
transform C&C's investment case from a brand owner business to
an over 50% pub company, resulting in uncertainty, "we believe, for
the shares as it would significantly alter the investment
case."
In late afternoon trading, C&C shares traded down 12% at
EUR3.44, valuing the company at EUR1.20 billion ($1.52
billion).
In the near term, Nomura expects to see opportunities to ensure
distribution for C&C's cider portfolio in the Spirit properties
in England and Wales.
"However, approximately half of the managed pubs are food- not
wet-led, which limits the potential upside," the analyst added.
C&C now has until 1700 GMT Nov. 20 to announce either a firm
intention to make an offer for Spirit or that it doesn't intend to
make an offer, whereas bidding rival Greene King has until 1700 GMT
Oct. 30.
Write to Razak Musah Baba at razak.baba@wsj.com; Twitter:
@Raztweet
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