Irish Brewer C&C Snubbed as Spirit Pub Engages Greene King

By Razak Musah Baba

LONDON--C&C Group PLC's (CCR.DB) plan to enter into the pub business may have to be put on hold after Spirit Pub Company PLC (SPRT.LN) said it has rejected an offer approach from the Irish brewer.

Following recent press comment, Spirit Pub--which is currently in talks with fellow U.K. pub company Greene King PLC (GNK.LN)--confirmed Thursday that it has received a preliminary approach from C&C regarding a possible offer for Spirit, but said "it has reviewed the proposal and rejected it."

Known for its Bulmers and Magners cider brands, C&C also confirmed the approach about a possible offer and didn't give any financial details but said a combination of the two companies would provide revenue and savings benefits and a new route to market for C&C drinks.

Press reports indicated the offer was around 115 pence (185 cents) a share with around a third of it in cash.

But a spokesperson for C&C said the amount offered was closer to 110 pence and the cash component of the offer was more than what Greene King PLC (GNK.LN) is offering Spirit Pub, adding that from a competition standpoint, the combination would give C&C, which has no pubs in the U.K, the means to a greater route to market its brand.

The spokesperson added that C&C approached Spirit because it will be a good fit, and not because C&C is out scouting to buy a pub company.

Pub firm Spirit has about 1,200 pubs nationwide, 750 of which are managed, most of which are in London and southeast region focused. Spirit's portfolio comprises Chef & Brewer, Fayre & Square pubs and also operates Wacky Warehouse, a soft play, party venue and activity center for children, as well as Good Night Inns, a group of hotels situated next to its pub restaurants.

C&C acquiring Spirit would place them well in competition with brewer/pub firms like Greene King, Marston's PLC and Fuller Smith & Turner PLC, as well established beer makers like Heineken NV which owns the Star Pubs & Bars' leased pub business which is made up of an estate of around 1,250 pubs throughout the U.K.

Shore Capital's Phil Carroll said the move for a pub business in the U.K. with a mixed estate of managed and tenanted pubs, some food led and some wet led, and some with hotel rooms creates a business with a completely different risk profile.

"It is not necessarily bad but just a very different proposition that should the situation develop further would require further assessment," Mr. Carroll said.

Likewise, Nomura's research analysts believes this would transform C&C's investment case from a brand owner business to an over 50% pub company, resulting in uncertainty, "we believe, for the shares as it would significantly alter the investment case."

In late afternoon trading, C&C shares traded down 12% at EUR3.44, valuing the company at EUR1.20 billion ($1.52 billion).

In the near term, Nomura expects to see opportunities to ensure distribution for C&C's cider portfolio in the Spirit properties in England and Wales.

"However, approximately half of the managed pubs are food- not wet-led, which limits the potential upside," the analyst added.

C&C now has until 1700 GMT Nov. 20 to announce either a firm intention to make an offer for Spirit or that it doesn't intend to make an offer, whereas bidding rival Greene King has until 1700 GMT Oct. 30.

Write to Razak Musah Baba at [e-mail]; Twitter: @Raztweet

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