M&B looks to food after selling 333 pubs

The buyer is the Stonegate Pub Company, a venture set up by London-based private equity firm TDR Capital. It has paid £373m for the package of 333 pubs, made up of 52 Scream bars, 75 town pubs, 67 community pubs, 68 other small pubs and 71 music bars and late night venues. M&B said EBITDA on the sites for the year to 10 April was £52m, so the deal represents an EBITDA multiple of around 7.2.

The sale is the latest in a string of disposals by M&B as it tightens its focus on food-led pubs. The disposals have now raised a total of £500m for the business. It first outlined the plans to reshape the business around food back in March and recently announced the sale of its Innkeepers Lodges and Hollywood Bowl ten-pin bowling businesses. Across the package of pubs just sold, food accounted for just 13% of sales.

M&B said it would reinvest the proceeds in “growth opportunities offered in the informal eating out market where the company’s market leading brands deliver attractive growth prospects.” The company is now left with 1,580 restaurants and food-led pubs, which it says offer greater potential for growth than wet-led sites. The 116 Scream, town and community pubs and late-night bars it has left will now be converted into one of M&B’s expansion brands, which include the Harvester, Toby Carvery, Crown Carveries and Sizzling Pub Co formats.

M&B chief executive Adam Fowle said: “We are pleased that we have been able to announce the exit from our price sensitive drinks-led pubs and our late night venues in a single transaction. This will now enable us to reinvest in the informal eating out market where our market leading brands, corporate scale and operational capability will deliver attractive growth and investment returns for our shareholders."

M&B added that the move away from drinking pubs had been prompted by factors including the smoking ban, duty increases, the recession and rising youth unemployment. Completion on the deal, subject to shareholder approval, is scheduled for mid-November.

Assuming the takeover goes ahead, all eyes now will be on plans for the 333 sites by TDR Capital, which has investments in companies including Ask and Pizza Express and is led by Manjit Dale and Stephen Robertson, who have both been involved in major pub deals in the past. The company plans to announce a management team for the Stonegate Group after completion of the deal. Dale said: “We believe the UK pub industry will undergo significant reshaping in the coming years and Stonegate will provide us with a platform to actively participate in this reorganisation.”