Punch will look to explore M&A opportunities in the market with the increased firepower of new investor Fortress, CEO Clive Chesser has told MCA.
Chesser was speaking after Fortress Investment Group, the SoftBank-owned, New York-based global investment firm, acquired Punch Pubs & Co.
The terms of the transaction were not disclosed, but sources close the deal told the Financial Times it valued the 1,300-strong pub operator at £1bn.
This is consistent with a valuation reported by Sky News ahead of the deal, though two further sources told MCA they were dubious Fortress would have paid as much for the pub company, one suggesting the consideration could have been £900m.
The source, who works closely in the pub sector told MCA the sellers, Patron Capital Partners and May Capital, would have realised good value out of the deal, considering how challenging Covid has made the trading and M&A climate.
They predicted Fortress was looking beyond the Punch estate, and would use the company as an acquisition platform to support the consolidation of the pub sector, with the possible buy-out of large, regionally-aligned, but under-performing Marston’s, for example.
Also included as part of the deal is Laine Pub Company, the Gavin George-led operator which sat under the same Vine Acquisitions investment vehicle as Punch, with both backed by Patron and May Capital.
Both management teams of Punch and Laine will be retained under the deal.
Analysts said Clive Chesser, who took on the slimmed down privatised Punch in 2018, had done an excellent job in investing some £90m the estate, and developing the multi-format operating model.
Chesser, who was previously led Greene King’s Pub Partners business, came to what was then known as Punch Taverns after it sold 1,900 pubs to Heineken’s Star Pubs & Bars, in a £305m deal, which saw the formation of the Punch Pubs & Co.
Under Patron and May Capital, Chesser had the backing to modernise and invest in the estate, as well as develop its training academy and development kitchen.
Clive Chesser said: “Fortress fully buys into and supports our strategic plan which is focused on a multi-model approach, partnering with our passionate and entrepreneurial publicans to generate the optimum return from each pub.
“Their increased firepower will also allow us to further explore M&A opportunities in the market as and when they arise.”
Chesser said that Fortress was an “experienced and innovative investor, with an excellent understanding of the strengths of our business and they share many of Punch’s business philosophies.
“We welcome their commitment to working with the existing management team, evolving our strategy and investing in the business to ensure its sustainable long-term growth. It is a hugely exciting step for our business,” he added.
Fortress already has UK interests. It acquired Majestic Wine in August 2019 and were a frontrunner to acquire a package of about 150 leased and tenanted pubs from Marston’s in 2019 for an estimated £45m. It was also in the running to acquire Morrison’s earlier this year.
Gavin George said he was looking forward to working with Fortress to continue the growth of Laine’s pub & brewing business, while thanking Patron and May for their help “navigating the challenges of the pandemic”.
“Looking ahead, the Laine Pub & Brew Co is well positioned to take advantage of the opportunities to grow all parts of our business with the backing of Fortress Investment Group,” he said.
Sector analyst Mark Brumby, of Langton Capital, said he saw the deal as a “major positive comment on UK freehold asset values”.
He added: “Fortress were also the underbidder on property-rich Morrison’s. The read-across for asset heavy companies such as Marston’s is fairly clear. And the value of M&B’s freeholds hasn’t escaped Piedmont or Elpida either!”
