Young's poised to ‘accelerate growth' through City Pubs acquisition
Pub group Young's is set to acquire City Pubs for around £162m, having "closely followed the City Pubs estate for some time".
City Pub Group was founded in 2011 and has since grown to over 40 sites across the southern half of England and Wales, with pubs such as Alfie's in Winchester and Cambridge Brew House in Cambridge.
Under the terms of the deal, City Pub shareholders will be entitled to 108.75p in cash, representing a premium of 46%.
Young's said the transaction represented a "rare opportunity" to increase its managed trading estate by 50 pubs to 279 pubs.
The managed operator of pubs and bedrooms across London and the South of England will also be adding 240 bedrooms to its portfolio, taking the total to 1,065.
It revealed the transaction was "a significant opportunity to accelerate Young's existing growth strategy and create value for all stakeholders of the Combined Group".
City Pubs had been boosted by a 12.4% increase in like-for-like sales in the first 38 weeks of the current financial year, but was not able to expand its portfolio as much as "it would have ideally have liked" due to increased pressure on margins.
Clive Watson, executive chairman of City Pubs, said: "The board believes the transaction significantly accelerates the value that could be realised in the short term by City Pubs if it were to remain independent. Additionally, the City Pubs Board is reassured by Young's similar entrepreneurial culture and its approach to investing in the business."
Simon Dodd, chief executive of Young's, said: "We believe that City Pubs is an excellent fit with Young's and the combination of the two businesses represents a compelling opportunity for all stakeholders. It will allow us to expand our estate through the addition of a complementary, high-quality pub and bedroom portfolio, with the potential for the benefit of significant operational synergies to be realised by both sets of shareholders, through the partial share offer."
The deal is conditional to the approval of the requisite majority of scheme shareholders at the court meeting and City Pub shareholders at the general meeting. If it is passed, the transaction will become effective in Q1 of 2024.
Houlihan Lokey is lead advisor to City Pub Group.
Meanwhile, in Young's interim results for the 26 weeks ended 2 October 2023, the pub group made £24.5m in profit before tax, a 2.5% increase compared to 2022, and £196.5m in total revenue for the period.
