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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Mitchells & Butlers plc    MAB   GB00B1FP6H53

MITCHELLS & BUTLERS PLC

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Slug and Lettuce owner to buy pub chain Ei for 1.3 billion pounds

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07/18/2019 | 06:43am EDT

(Reuters) - Slug and Lettuce pub chain owner Stonegate on Thursday said it agreed to buy larger rival Ei Group for 1.27 billion pounds, taking control of some 4,000 additional pubs to become Britain's biggest pub operator.

The deal seals a major turnaround for Ei, which fetched a price tag of 285 pence per share - more than tenfold its value in 2012, when it traded as low as 27 pence a share.

The offer represents a 38% premium to Ei's closing price on Wednesday, and its shares surged almost 40% in morning trade.

Britain's hospitality sector has been rocked by the closure of a number of major restaurant chains this year, while pub operators battle the cost of higher minimum wages as well as a move away from pub drinking by younger Britons.

Analysts at Peel Hunt said the deal would allow Stonegate to at least triple its earnings before interest, taxes, debt and amortisation and provide a substantial pool of pubs to sell off or convert from leased to managed.

Stonegate has a strong track record for acquiring, integrating and converting pubs, Peel Hunt said.

Stonegate, which is owned by private equity fund TDR, is best known for its Walkabout, Yates and Slug and Lettuce chains. In contrast, Ei runs a disparate range of pubs, often in partnership with landlords and small operators, who tailor their menus and entertainment to cater to local customers.

INITIAL BIDS REJECTED

Ei Chief Executive Officer Simon Townsend told Reuters that Stonegate had made an initial unsolicited approach to Ei's board a few months ago, which was rejected as inadequate and subsequent revisions were also turned down.

"There came a point where we were able to achieve a price which the board felt was worthy of engagement and has led us to the place where we are today," Townsend said.

Shares in Ei rivals Mitchells & Butlers, Marston's, Greene King and J D Wetherspoon all rose on news of the deal.

Ei, which traces its roots back to 1991, has grown through several acquisitions, including that of former Whitbread pubs. It employs more than 1,800 people as a group along with thousands more in the pubs it owns or operates.

Stonegate, which operates 765 pubs in Britain, will assume debt of around 1.7 billion pounds as part of the deal.

Ei will be delisted after the deal and there may be a small number of job cuts, Townsend said.

Ei directors were advised by Deutsche Bank and Rothschild & Co while Barclays, Nomura and Goldman Sachs acted as financial advisers to Stonegate.

(Reporting by Tanishaa Nadkar in Bengaluru; Editing by Deepa Babington)

By Tanishaa Nadkar and Noor Zainab Hussain

Stocks mentioned in the article
ChangeLast1st jan.
BARCLAYS PLC 1.91% 139.82 Delayed Quote.-7.11%
DEUTSCHE BANK AG 4.71% 6.16 Delayed Quote.-11.58%
EI GROUP PLC 0.00% 281 Delayed Quote.54.74%
GREENE KING 0.36% 563 Delayed Quote.6.63%
J D WETHERSPOON PLC 0.34% 1471 Delayed Quote.32.17%
MARSTON'S PLC 1.15% 105.4 Delayed Quote.12.07%
MITCHELLS & BUTLERS PLC 2.17% 306.5 Delayed Quote.19.08%
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Financials (GBP)
Sales 2019 2 225 M
EBIT 2019 313 M
Net income 2019 155 M
Debt 2019 1 638 M
Yield 2019 -
P/E ratio 2019 8,44x
P/E ratio 2020 8,06x
EV / Sales2019 1,32x
EV / Sales2020 1,26x
Capitalization 1 309 M
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Mean consensus OUTPERFORM
Number of Analysts 16
Average target price 332,07  GBp
Last Close Price 306,50  GBp
Spread / Highest target 30,5%
Spread / Average Target 8,34%
Spread / Lowest Target -15,2%
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Managers
NameTitle
Phil Urban Chief Executive Officer & Director
Robert Lewis Ivell Non-Executive Chairman
Tim C. Jones Finance Director & Executive Director
Ronald Alexander Robson Deputy Chairman
Edward Irwin Non-Executive Director
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