14th Sep 2006 07:03
Punch Taverns PLC14 September 2006 PUNCH TAVERNS PLC("Punch" or "the Group") Acquisition of Mill House Inns ("Mill House") Punch Taverns plc today announces the acquisition of the entire issued sharecapital of Mill House Inns from the Bank of Scotland and the management team ofMill House. Highlights • Mill House comprises a managed estate of 82 high quality, principally freehold or long leasehold, food-led neighbourhood pubs • This bolt-on portfolio enhances the Spirit acquisition, completed earlier this year, and further increases the overall quality of Punch's estate. The acquired pubs will be integrated into one of the three go-forward Spirit segments: Value Food, Premium Food and Quality Local • The acquisition values Mill House at £164 million and will be funded from new short term bank borrowings • In the first full year of operation, this acquisition is expected to be both earnings enhancing and to deliver a return in excess of Punch's weighted average cost of capital Information on Mill House Mill House Inns, a private company, operates a high quality neighbourhood pubestate of 82 pubs located throughout South England and the Midlands. The pubsare generally situated off the high street in edge-of-town or semi rurallocations and have a strong 41% / 59% food / drink mix. 90% of the estate isfreehold or long leasehold. In 2005 Mill House underwent a management buyout which prompted a strategicreview of the business that resulted in a significant development of the estate.This involved the introduction of three new trading styles (Mill House Inns, TopDog and food destination pubs) and, in line with its strategy of rationalisingthe portfolio, high quality pubs were added to the portfolio through theacquisition of the Pioneer Pub Group whilst their gastro pubs, and tail end pubswere divested. Mill House has experienced continuous growth over the last five years. As atJuly 2006, Mill House's unaudited balance sheet had gross operating assets of£147 million. As at July 2006, Mill House generated an unaudited run rate outletEBITDA of £16.2 million (before central costs and overheads). Consideration and financial effects A wholly owned subsidiary of Punch is acquiring Broomco (3708) Limited, theholding company of the Mill House Group. The consideration for the acquisitionis the payment of £169 million in cash at completion (including the assumptionof £5m in cash). The cash consideration is to be funded from new short term bankborrowings. Effect and benefits of the acquisition Following the Spirit acquisition in January, Punch consolidated around 680 ofSpirit's very high quality managed pubs into a separate division. Thisestablished the necessary infrastructure to allow for the conversion of Spirit'sother 740 managed pubs into the leasing format, a process that is on track to becomplete by August 2007. Punch has consistently demonstrated its ability to extract value fromacquisitions. In line with its stated strategy to maximise the businessportfolio and thereby create value for shareholders, Punch management hascontinued to seek opportunities to further increase the quality of its pubestate. The acquisition of Mill House was an opportunity that fits precisely thisscenario. With this transaction, Punch is securing 82 of the highest qualityneighbourhood pub assets in the UK which will complement Punch's existingestate. The Mill House portfolio shares a similar customer profile to that ofSpirit and will integrate well into the three existing Spirit divisions of ValueFood, Premium Food, and Quality Locals. The estate's strong food mix willfurther increase Punch's exposure to high growth food markets ahead of theforthcoming smoking ban in England and Wales next year. Mill House is an excellent fit with Punch. Following integration, synergies areexpected to be generated from purchasing benefits and other cost savings. Theacquisition is expected to be both earnings enhancing and to deliver a return inexcess of Punch's weighted average cost of capital in the first full year ofoperation. Current trading As announced at the time of Punch's pre-close trading statement on 6 September2006, trading across the Group has continued in line with Board expectations. Punch expects to announce full year results on Thursday, 9 November. Giles Thorley, Chief Executive of Punch Taverns plc, commented: "We are delighted with the acquisition of Mill House which fits neatly into ourstated strategy of securing opportunities to further increase the quality of ourestate as we continue to build the highest quality pub portfolio in the UK. "Mill House is one of the best food-led pub businesses in the market andcomplements our existing estate, providing scope for synergy benefits and goodreturns from the outset. Our structure gives us the flexibility to own andoperate the best pubs in the most appropriate trading format which enables us tomaximise shareholder value." 14 September 2006 Punch will be hosting a conference call for analysts at 8.30am today. Pleasecall Jamie Ramsay at College Hill on 020 7457 2048 for dial-in details. Thepresentation will be available for download on the Punch website(www.punchtaverns.com) from 7.30am today. ENQUIRIES: Punch Taverns plc Tel: 020 7868 8903Giles Thorley, Chief Executive Citigroup Global Markets Tel: 020 7986 4000David WormsleyAnthony GutmanChris Zeal (Corporate Broking) College Hill Tel: 020 7457 2020Justine WarrenMatthew Smallwood Citigroup Global Markets Limited is authorised and regulated by the FinancialServices Authority and is acting as financial adviser to Punch Taverns plc andfor no one else in connection with the acquisition and will not be responsibleto anyone other than Punch Taverns plc for providing the protections afforded toits clients or for giving advice in relation to the acquisition. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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