Stonegate, the company behind Slug and Lettuce, Walkabout and Yates pub chains has agreed to buy the UK’s biggest pub owner for £1.3bn.
EI Group, formerly known as Enterprise Inns, plans to turn over its 4,000 pubs and properties across the country to Stonegate, whose private equity backers TDR Capital are looking to expand, despite current challenges facing the pubs sector and high street retail in general.
The deal is the second for TDR Capital in a month, after it bought We Buy Any Car owner BCA Marketplace for £1.9bn in June.
Stonegate’s bid valued EIG’s shares at 285p each – 38.5% above the closing price on Wednesday evening, and 26.8% above the highest closing price over the last 10 years, the companies said.
EIG shares soared by more than 38% on Thursday, although the deal recommended by the board is yet to voted on by shareholders.
Stonegate said: “The combined group will be better positioned to compete effectively in what is expected to be a challenging operating environment for the foreseeable future, which would be to the benefit of all stakeholders including tenants, employees, customers and local communities.”
Ian Payne, chairman of Stonegate, said: “We look forward to working with EIG and its publicans to support future growth and create stronger pubs at the heart of communities across the UK.”
Stonegate was set up by TDR in 2010 as a vehicle to buy 333 pubs from Mitchells and Butlers.
The company spent £350m to expand and now has more than 765 sites, after making 11 acquisitions since launch.
EIG chairman Robert Walker said the commercial benefits of combining the companies are “compelling”.
He said: “Stonegate is committed to continuing to invest in the business for the future benefit of the combined business, tenants and employees.
“The EIG board believes that this is a combination it can recommend with confidence to shareholders and stakeholders alike.”
EIG’s sale is the latest in a long line of deals and bids by private equity firms, keen to buy out publicly-listed companies.
It also follows on from the sell-off from another prominent British brewery and pub chain, after London Pride brewer Fuller’s sold its beer business to Japanese giant Asahi for £250m in January.