Pub Operator Greene King Agrees To £4.6bn Hong Kong Offer

By Dave Simpson
Pub Operator Greene King Agrees To £4.6bn Hong Kong Offer

British pub operator Greene King has agreed to a £4.6 billion bid from Hong Kong-listed CK Asset, which said it was seeking to increase its UK presence even as Brexit looms.

The offer from CK Asset values shares in the brewer of Old Speckled Hen and Abbot Ale at 850 pence each, or £2.7 billion in total.

Including debt, the deal value amounts to £4.6 billion, though some analysts said that the cash value should be higher.

"We would see 950p per share ... as a more attractive exit price to secure shareholder consent," said Shore Capital analysts, noting that underlying trading had improved lately.

CKA already owns a near 3% stake in Greene King.


The proposed takeover comes after Greene King, which has 2,700 pubs, restaurants and hotels across the UK, has struggled with a rise in the minimum wage and a move away from pub drinking among younger Britons.

Britain's looming exit from the European Union risks denting the economy, but in the meantime, the weakness of sterling has made it cheaper for foreign buyers to snap up UK assets.

More than 11,000 pubs have shut in the UK in the last decade, which is a fall of almost a quarter, according to a 2018 analysis by the Office for National Statistics.

However, in June, Greene King posted a higher than expected 1.6% rise in annual adjusted profit before tax to £246.9 million.

British Culture

Some saw the move as likely to lead to more pubs closing as CKA looks to cash in on their property value.


"While it's a bottle of champagne for shareholders, there may be fewer reasons to celebrate for patrons. I think we can comfortably expect more pub closures," analyst Neil Wilson said.

CKA said its strategy was to look for businesses with stable and resilient characteristics and strong cash flow.

"The company believes that the United Kingdom pub and brewing sector shares these characteristics and that pubs will continue to be an important part of British culture and the eating and drinking-out market," it said in a statement.

The deal would mark the latest in a series of investments by CKA founder Li Ka-shing's business empire in the UK, with holdings in retailer Superdrug, utilities Northumbrian Water and Wales and West Gas, and the Port of Felixstow.

It also comes as the sector sees a wave of consolidation.


Last month, Slug and Lettuce chain owner Stonegate agreed to buy larger rival Ei Group for £1.27 billion, while Japanese brewer Asahi Group said that it would snap up the British beer business of Fuller, Smith & Turner.

Greene King's directors intend to unanimously recommend shareholders vote in favour of the deal, which will be funded by CKA's existing cash resources.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.