8th Sep 2015 07:12
LONDON (Alliance News) - Conviviality Retail PLC Tuesday said it has struck a deal to fully acquire drinks supplier Matthew Clark (Holdings) Ltd for GBP200 million, of which it will pay just over half to fellow-listed Punch Taverns PLC.
The Matthew Clark business is a 50/50 joint venture between Punch Taverns and Hertford Cellars Ltd, a subsidiary of Accolade Wines Ltd. As part of the same transaction, Hertford Cellars will sell its 50% shareholding in Matthew Clark to Conviviality Brands.
Conviviality will pay GBP100.7 million to Punch for its 50% stake in Matthew Clark, with the remaining balance being paid for the other 50% stake held by Hertford Cellars.
The agreement follows on from Conviviality entering into a non-disposal undertaking with both companies in mid-August.
Conviviality shares were up 16.1% to 180.0 pence per share on Tuesday morning, one of the AIM All-Share's best performers, whilst Punch Tavern shares were up 5.7% to 129.0 pence.
The deal is expected to be completed by October 2, if approved by Conviviality shareholders at a meeting scheduled for September 4.
However, to complete the deal, Conviviality said it will conduct a placing to raise around GBP130.0 million, with the remaining balance being drawn-down from the company's new debt facilities. That placing will comprise of over 86.6 million new shares at 150.0 pence per share.
Conviviality said it has received irrevocable undertakings for the deal and associated placing from 54.5% of its issued share capital and further "intent to vote in favour" representing a further 9.1% of its issued share capital.
Conviviality said the acquisition of Matthew Clark will "create a major UK drinks wholesaler" with combined annual sales of over GBP1.10 billion and the enlarged group will be independent of major drinks brands, enabling it to supply an unrestricted selection of products to customers who value breadth of range.
Conviviality is expecting the acquisition to be "earnings enhancing" within the first year of ownership.
In its own statement, Punch Taverns said it will make around GBP98.7 million in net cash proceeds after costs and expenses, which will improve the company's "financial flexibility to pursue its strategic objectives", it said.
Once the deal is completed, Punch Taverns will enter into a 10 year non-exclusive drinks supply contract with Matthew Clark Wholesale Ltd. Under this supply agreement, Matthew Clark Wholesale will supply selected wines and spirits drinks products to Punch Taverns at agreed pricing levels.
"We are pleased to have agreed the disposal of our investment in Matthew Clark and at a significant premium to our current book value. The sale of a non-core business will enhance our financial flexibility to pursue our strategic objectives for our core activities," said Duncan Garood, chief executive of Punch Taverns.
"We are pleased to have reached agreement on the acquisition of Matthew Clark as this will accelerate our strategy of expanding our wholesaling expertise into new markets and channels," said Diana Hunter, chief executive of Conviviality.
In the year ended February 28, Matthew Clark reported revenue of GBP811.2 million and adjusted earnings before interest, tax, depreciation and amortisation of GBP25.3 million.
By Joshua Warner; [email protected]; @JoshAlliance
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