16th Jun 2014 07:01
LONDON (Alliance News) - Mitchells & Butlers PLC Monday said it has acquired the majority of the activities of pub and restaurant operator Orchid Group for GBP266 million in cash.
The UK pubs and restaurant operator had said last month it was in exclusive discussions to buy the majority of the assets of Orchid. On Monday, it confirmed it has acquired a total of 173 "well-located" pubs mainly in the South Eat and North West of England, of which 158 pubs are freehold or long leasehold. It said the purchase will be immediately earnings enhancing, with double-digit earnings enhancement following cost cuts and revenue synergies, with returns well ahead of the cost of working capital.
Founded in 2006, Orchid is the UK's sixth-largest managed pub and restaurant chain, with a total of 240 outlets and 5,000 employees. Its brands include Do Drop Inn's and Dragons Thai restaurants.
Mitchells & Butlers said it will convert 96 of the 173 acquired Orchid pubs to its Mitchells & Butlers brands and formats over a two-year period, including its brands Harvester, Toby Carvery, Ember, Miller & Carter, Castle and Vintage Inns. It said it will spend around GBP35 million in capital investment over two years to convert the Orchid sites.
The company said the pub conversions will significantly increase sales and profits for the company, and results in cost savings and synergies of at least GBP6 million per year.
Mitchells & Butlers said it expects its share of the UK branded pubs and restaurants market to grow by 6% per share between 2014 and 2018.
The company said it would pay for the acquisition from existing cash resources, plus a new GBP150 million unsecured credit facilities from existing lenders. The new facilities have a three-and-a-half year term.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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