Fuller’s has this morning confirmed it has acquired the six-strong Bel & The Dragon country inns estate from Longshot, the business led by Joel Cadbury and Ollie Vigors, in deal valued at £18.5m.

Fuller’s chief executive Simon Emeny told MCA that the Bel & The Dragon name would be retained and hinted the brand could be extended to other parts of its estate in the future.

Emeny also said that after going through a period of internal investment, Fuller’s, which has acquired Dark Star Brewery and arguably the four best sites from the central London-based We Are Bars business since the start of the year, was in the right place to start acquiring again.

The deal for Bel & The Dragon, includes five freeholds.

MCA revealed in September 2016 that the business had been placed on the market in through Grant Thornton and it is thought to have attracted strong interest from a number of trade buyers, including Brakspear and Cirrus Inns. However, they were unable to match Longshot’s valuation at that time, which was believed to have been closer to £25m. Longshot took Bel & The Dragon off the market in May last year, after completing a £5.3m debt finance deal through OakNorth.

It acquired the then four-strong Bel & The Dragon from Orchid Group in August 2010 for c£4m.

Bel & The Dragon currently operates sites across Berkshire, Surrey and Hampshire, located in Cookham, Churt, Kingsclere, Odiham, Reading and Windsor. It closed its site in Godalming last year and subsequently placed the pub on the market.

Comment by MCA’s Mark Wingett

As a business, Bel & The Dragon has a colourful history. It was acquired by Gourmet Holdings in 2004 and sold to Ultimate Leisure in June 2007. The Newcastle-based late-night operator acquired the then four-strong pub restaurant business, from Gourmet Holdings for £8.75m. However, just two years later and now called Premium Bars and Restaurants, that company was placed into administration and Bel & The Dragon found itself part of the much larger Orchid Group.

Less than a year later, Joel Cadbury and Ollie Vigors were given a five-day time frame within which to buy the group for £6.5m, which they turned down, only for the offer to come back six months later with another c£3m off the asking price. This time the deal got done, with Cadbury’s new investment vehicle, Longshot, acquiring the sites in Windsor, Cookham, Reading and Godalming.

Over the last seven years, Longshot has made significant invest in the business to enable it to be restored to its former glories, adding rooms where necessary, securing further sites in Churt, Kingsclere and Odiham and bringing Ronnie Kimbugwe, who spent most of his career working with Gordon Ramsay, as executive group head chef.

The upshot has been the creation of a small group of gastropubs with a strong premium identity appealing to core target market of affluent and aspirational consumers, or as Cadbury once put it, “somewhere where my friends can drive to within an hour of London and get high-quality food and drinks, and perhaps stay the weekend”.

It has often taken a different approach to its food and drink offer, you won’t find many classic pub dishes on its menu. There isn’t a burger on the menu at any of Bel & the Dragon’s pubs, while fish and chips only make an appearance at one of its sites. As chief operating officer Hector Ross said last year: “Bel & the Dragon provides a relaxed but also a fine dining experience. It is good quality English grub made from scratch complemented by a lovely wine list. The high quality of food is very much part of our DNA.”

Expansion, although not swift, has, in part, been motivated by the ability to add rooms to the pubs to boost both midweek and weekend trade, which is particularly important in some of the more remote locations. The Churt site, which was the company’s fifth acquisition, was attractive because it had 12 bedrooms – six more have since been added – and rooms become a key pillar of Bel & the Dragon’s expansion strategy. One that Fuller’s will look to take advantage of and add to. Accommodation currently accounts for about £1m of Bel & The Dragon’s turnover, with 80% of people who stay at its sites also dining. Its occupancy rate currently stands at c70%. Ross, who it is thought will leave Bel and The Dragon and stay with Longshot, said last year: “We added five bedrooms at Cookham and that was a game changer for us. We immediately had 10 people dining with us on a Monday night. Rooms bring enormous opportunities; they are profitable and they get the corporate diners in during the week and the leisure customers at the weekend.”

The latest figures available show that the work carried out by Cadbury, Vigors and Ross has paid off, with the then seven-strong business posting turnover of £10.2m in 2016 and EBITDA of £2.4m. Like-for like-sales were up 13% in 2017. Average spend at Bel & the Dragon is £25 for lunch and £40 for dinner. It has come a long way since Cadbury once stated: “When we bought the portfolio, the flagship bar in Cookham was turning over around £4,000 per week.”

“We added five bedrooms at Cookham and that was a game changer for us,” says Ross. “We immediately had 10 people dining with us on a Monday night. Rooms bring enormous opportunities; they are profitable and they get the corporate diners in during the week and the leisure customers at the weekend

The success of the group’s investment programme, encouraged Longshot to bring the business to market in September 2016, and the business generated significant interest. However, it was thought that a valuation of around £25m, put of the majority of parties. I understand at the time that Brakspear where the lead bidder for the business, valuing at closer to £18m, with Cirrus Inns, led by Cadbury’s old business partner Alex Langland Pearse (Langy), also in the frame but with a bid just under that. Oakman Inns, Fuller’s and Young’s were all thought to have run the rule over the business, but with Cadbury in particular not at that time keen to drop his valuation, the process was stopped and a new debt facility was soon after agreed with OakNorth. A decision that wasn’t particularly taken well by some of the pub group’s shareholders, who believed that one or two of the bids represented fair value for the business.

It seems Fuller’s remained patient and talks on a possible deal were reignited earlier this year, with price expectations now being matched on both sides. As Simon Emeny told me: “We’ve known the business for a number of years and built up a good relationship with Joel (Cadbury) and now seems the right time and the right deal for both sides. It is a high-quality business available at a sensible price.”

The business sit right in the middle of Fuller’s heartland. “It specialises in really, high-quality fresh food, great wine, a great range of drinks, with really well trained, motivated staff. It also has, with one exception – Windsor, bedrooms in every property So it is an ideal fit for us,” says Emeny. Indeed, Bel & The Dragon bears many similarities to the company’s existing out-of-London business. There are 57 bedrooms in the business at the moment and Fuller’s has plans over the next year to add another seven.

Emeny says: “We are going to be in a period now where we learn as much as possible about the business, the way the brand works, and we are retaining most of the team that works in the business. We will be retaining the name Bel & The Dragon and working out how much we can extend that business in the future.”

The deal for Bel & The Dragon, follows the acquisitions already this year of Dark Star Brewery and the four best sites in the London-based We Are Bars portfolio, suggesting a shift in strategy at Fuller’. Emeny says: “I am pleased with how we have used the last couple of years. Post the Brexit vote it has been quiet difficult to do deals at the right price and therefore we have focused an awful lot on investing internally. We’ve invested in our own estate, particularly on the tenanted side. We’ve grown the number of bedrooms in the business. And most importantly we have spent a lot of time and effort investing in the infrastructure of Fuller’s, everything from training to IT systems, and the brewery itself. So now with prices at a more sensible level, this is a good opportunity for us to start investing at an external level again. After going through a period of consolidation, we are in the right place to start acquiring again.”

That last statement will have pricked up the ears of a number a smaller, multi-site operators based in the south and south east. There are a number of such operations, which often find themselves at a crossroads, whether to become a bigger entity and finding the means to do so, or whether to explore an exit. The Restaurant Group has already shown its intent to grow its Brunning & Price estate through acquisitions, now Fuller’s has come to the party, whilst Young’s chief executive Patrick Dardis told MCA last year that his own company had the firepower to spend £100m plus on a deal. The process for Bel and the Dragon, also showed that Cirrus Inns and Brakspear are acquisitive.

Peach Pub Company is already exploring its options, as did Heartstone Inns previously, but for the likes of White Brasseries, Oakman Inns, Redcomb Pubs, Red Mist Leisure, Upham Pub Company and Anglian Country Inns, opportunity could be set to knock over the next 18 months, if they so wish, that’s not to mention those London-based group’s such Drake & Morgan, Urban Pubs and Bars and ETM Group. The UK’s tenanted market is going through its own period of consolidation, although in more significant estate numbers, but it feels like its managed cousins could be set to join them.

Returning to this morning’s deal, as ever it seems that Fuller’s has gone about its business in an impressively quiet and decisive manner. With two further high-profile central London train station sites to come on board next year as well, it will hope to take further advantage of the internal groundwork it has put in over the last 24 months.