C&C, the Tipperary-based maker of Magners and Bulmers cider, is believed to be preparing a fresh bid for a UK-listed group of more than 1,200 pubs in an offer that may end up topping €1 billion.
Spirit Pub Company, which is currently subject to an offer of around £723 million (€916m) from rival pub group Greene King, last night announced it had rejected an initial rival offer from C&C.
It was speculated in the UK last night that C&C had bid in the region of £760 million. Greene King made an offer last month for Spirit of about £660 million.
With debt the £760 million offer from C&C would attribute an enterprise value to Spirit of £1.4 billion.
Pub group
It is understood that C&C, which sources say has been on the lookout for a pub group in the UK to give it a route to market for its drinks brands, only became involved after Greene King made its first offer. The Irish company is being advised by
Rothschild
.
C&C was understood to be last night preparing a statement confirming it wants to buy Spirit and laying out the rationale for the deal.
Spirit confirmed the bid from C&C to the London Stock Exchange after markets closed last night, and said C&C had until November 20th to say whether it would make a new offer or desist: commonly known as a “put up or shut up” deadline.
Spirit, large parts of which were once owned by Scottish & Newcastle (S&N), has an estate of more than 750 branded pubs and a further 450 or so leased outlets.
Its brands include Fayre and Square, Flaming Grill Pubs, John Barras Pub Company, and Wacky Warehouse. The group had revenues last year of about £758 million.
If C&C were to snatch Spirit from under the nose of Greene King it would represent a significant coup for the Irish company's management team, led by highly-regarded former S&N executive Stephen Glancey.
Several of C&C's top management, including Mr Glancey and also the group chairman Brian Stewart, are already familiar with the Spirit estate of pubs as S&N owned many of them until 2003. S&N was later bought by Heineken, although Spirit is now an independent listed company.
Part of the rationale for the deal being discussed internally within C&C is that the Irish company is highly cash generative, which would dovetail well with the financing model of the pubs, which are financed with long-term debt.
C&C was last night also preparing to tell its shareholders that a deal with Spirit would help it cement a “vertically-integrated” model. Many pub groups in the UK are or were once owned by drinks companies which use them as distribution outlets for their brands.
“It would be a shop window for C&C’s products,” said a source close to the company.
As well as Bulmers/Magners, C&C also owns the Scottish lager brand Tennents, Gaymers cider, Hornsby’s, Blackthorn and Ye Olde English cider.
It is believed among C&C’s senior management that if it successfully develops a vertically-integrated model C&C may also become attractive to Asian brewers looking for commercial deals for distribution routes into the UK.
Irish market
In the Irish market C&C already has an element of vertical integration through its purchase of drinks distribution company
Gleesons
, for which it paid €58 million. In Scotland it this year purchased the part of Wallace’s Express, a wine and spirits wholesaler, that it did not already own.
Mr Glancey took over as chief executive of C&C in 2011. He has since overseen an ambitious expansion, including making a big bet on the expanding US cider market with the purchase of the Vermont Hard Cider Company, which it bought for $305 million.
