There has been movement in the acquisitions market, talk of a flotation and likely responses to the market rent-only option (MRO) recently, and Dominic Walsh thinks there may be more on the horizon
There’s been plenty of activity in the pub sector, what with Greene King all but sealing the deal on Spirit Pub Company, and Stonegate Pub Company preparing the groundwork for a stock market flotation in the early part of next year.
Then there’s Marston’s acquisition of the lion’s share of the Thwaites beer business, and Enterprise Inns and Punch Taverns both drawing up game-changing responses to the market rent-only option (MRO) legislation.
But is there further M&A afoot? It seems to have gone almost unremarked that, during the course of the past three months or so, the Young’s share price has frothed and is now almost 30% higher after bumping along at broadly the same level for the previous nine months or so.
Now before I set too many hares running, I should stress that I am unaware of anyone stalking the pub operator. Barring a couple of very vague market whispers along the lines of “there must be something going on”, I cannot, in all honesty, pin the share rise on bid speculation.
It would also be easy to pin part of the movement on May’s strong full-year results, although much of the increase does pre-date the results.
And yet somehow it feels like Young’s has been on a path towards an eventual sale from the time the group’s antiquated share structure was simplified, the late, great John Young died and its historic brewery in Wandsworth was closed and sold off.
In between times, the proportion of the Young’s shares controlled by the family and associated employee trusts has fallen below a majority, possibly even below 30%.
So what does all this mean? Well probably nothing at all! But I cannot quite shake off that nagging feeling that, at some point, one of the many admirers of the unique Young’s pub estate in London will decide to make an approach.
In some way, the most obvious candidate would be Greene King, which has made no secret of its ambition to boost its already strong presence in the prosperous southeast and the capital in particular.
In fact, I would be truly amazed if Rooney Anand had not had a quiet word with his Young’s counterpart, chief executive Steve Goodyear, at some point in the past few years, just to mark his card in the event that a sale might be contemplated.
Goodyear is highly respected for the job he’s done bringing Young’s into the 21st century in the 12 years since he took the reins, but that is a long time in stock exchange terms and one can’t help feeling that when he does eventually call time on his career at Young’s, it will represent a further eroding of the group’s independence.
Mind you, one theory doing the rounds is that Goodyear, a firm favourite with the shareholders who will be pitching up at July’s annual meeting, could step up to chairman. Current incumbent Nicholas
Bryan took on the role when John Young passed away almost a decade ago. Mind you, John Young held the post for 44 years so perhaps we shouldn’t expect too much change at the top any time soon!
Not that Greene King is in a position to do any other big deals at the moment given its impending takeover of Spirit Pub Company.
Rooney Anand does not lack for ambition, that’s for sure, but even he might struggle to convince his shareholders that he has the capacity to swallow and integrate two big acquisitions at the same time.
He also has a bit of a challenge on his hands to get his own company back firing on all cylinders.
There’s no doubting the quality of the business the talented Anand has built up during his decade running the company, but its past two or three updates suggest things have just come off the boil a shade.
I am talking small degrees here, but given the height of the bar Anand has set it is perhaps unsurprising that some commentators are suggesting that he needs the Spirit deal rather badly to restore the group’s fortunes and get it going forward again.
Anand’s comments about the impact of the tougher drink-driving rules in Scotland certainly divided opinion, to say the least, while question marks over the Hungry Horse brand, once the bedrock of the group’s strong growth credentials, are looming amid widespread speculation that the chain’s like-for-like sales have been going backwards at a rate of knots.
Whatever you do, don’t ask Anand about it, though. When I did so – a perfectly reasonable question for a journalist to ask, I’d suggest – he got very touchy indeed and started accusing me of “peddling speculation”.
Well until now, I have done no such thing – but given that it has become common currency across the industry that Hungry Horse has hit a rough patch, I don’t think I can be accused of peddling anything other than the truth.
One factor that may have had an impact on the performance of Greene King’s managed pubs is the growing competition from the casual-dining chains, a phenomenon alluded to by both Marston’s and Wetherspoon in recent updates.
By some estimates, 1,000 new restaurants opened up across the country last year alone as the likes of Côte, Bill’s, Las Iguanas and Ed’s Easy Diner vied with The Restaurant Group, Prezzo, Carluccio’s, Nando’s, YO! Sushi and a myriad of smaller chains for new sites.
Some of the established casual-dining groups that hit a bit of a wall during the recession are also returning to the front foot under new ownership – the likes of PizzaExpress, Strada, Azzurri Group (ASK Italian and Zizzi) and Casual Dining Group (Café Rouge and Bella Italia) – and, in many cases, new management.
So while Steve Richards is busy rejuvenating the once-tired Café Rouge and Bella brands, Steve Holmes is doing the same for Azzurri’s two Italian concepts. What both Steves have realised is that the consumer won’t put up merely with more of the same and that, with so many competitors doing innovative and exciting things, the status quo is a one-way ticket to failure.
While in both cases that means creating a modern and enticing environment and upping the ante on service, it also means bringing new and fun touches to the F&B offer. For example, Azzurri is taking the public’s love affair with Prosecco a step further by trialling the Italian fizz on draught. It also offers diners the opportunity to “pimp up” their fizz with a choice of fruit purées like peach, offered at the table.
Hardly revolutionary but it makes a meal a bit more exciting and it’s the sort of thing that most pubs will struggle to match.
