Greene King and Spirit shareholders to vote on £773.6m tie-up

Greene King shareholders are due to vote next week on the company's proposed acquisition of the Spir

Greene King shareholders are due to vote next week on the company's proposed acquisition of the Spirit Pub Company. - Credit: Archant

Shareholders in Greene King are due to vote next week on its proposed £773.6million acquisition of the Spirit Pub Company.

The addition of Spirit, owner of pub restaurant brands including Chef & Brewer, would leave Bury St Edmunds-based Greene King with an estate of more than 3,000 managed and leased pubs, compared with a current total of around 1,900.

The possibility of a rival bid finally disappeared earlier this week when Irish drinks group C&C, which last October expressed interest in a tie-up with Spirit, confirmed that it no longer intended to make an offer.

However, Greene King’s cash and shares offer, which will hand Spirit shareholders a 28.9% stake in the combined business, remains subject to approval by investors in both companies.

Greene King shareholders are due to vote at a meeting starting at 11am on Tuesday, January 13, with a vote by Spirit shareholders due to follow at a meeting scheduled start at 3.45pm the same day, following the company’s annual general meeting.

C&C, which owns drinks brands including Magners, Bulmers and Gaymers ciders and Tennent’s lager but does not currently have a pub estate of its own, viewed Spirit as an opportunity to create a new vertically-integrated player in the UK market.

However, most analysts suggested that a tie-up between Greene King and Spirit offered greater scope for efficiencies, and on Tuesday, ahead of a 5pm deadline under UK takeover rules to make an offer or walk away, C&C confirmed it would not be proceeding with a bid.

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Having rebuffed an initial approach from Greene King, the Spirit board has recommended shareholders to accept the Suffolk company’s offer.

Spirit has an estate of 794 managed pubs, also including those under the food-led Fayre & Square and Flaming Grill brands and the drink-based Taylor Walker and John Barras chains.

It also has 433 pubs in its leased estate, the majority of which are former managed sites with an average annual net income of more than £100,000.

Under the deal, Spirit shareholders will receive 0.1322 new Greene King shares and and 8p in cash for every Spirit share currently held.

The cash element, to be paid by Spirit as dividends, will consist of a 1.5p per share final dividend for 2014 and a special interim dividend of 6.5p per share.

Based on Greene King’s closing share price of 808.5p on November 3, the offer valued each Spirit share at 115p, representinig a premium of 52.2% on the value of 75.5p on September 22, the final day before Greene King’s initial approach.

C&C’s approach, which also involved a mix of cash and shares, valued Spirit at around £750m, topping a previous £725m approach from Greene King which had prompted the Spirit board to enter into talks with the Suffolk company, having rejected a previous approach.

However, Spirit signalled that it continued to favour a tie-up with Greene King, viewing this as offering greater synergies, and this was reflected in the recommended offer subsequently agreed, which invisages annual cost savings of around £30m.