Heineken UK, owner of the leased pub operator Star Pubs & Bars, has agreed to sell 111 pubs to Admiral Taverns for an undisclosed sum.
The deal, which is expected to complete in October, will take Admiral’s estate close to 1,000 pubs, and leave the Star estate at 1,100 sites.
Heineken UK managing director David Forde said: “This sale frees up resources and enables us to focus on the core estate which has great scope for growth whilst continuing to showcase our cider and beer brands.
“We regularly review our estate to ensure that our portfolio contains pubs that have the right profile for our business, and can continue to benefit from our long term investment. Seeking a respected and experienced trade buyer for the sale of these pubs was our preferred option and we are delighted to have achieved that ambition with Admiral Taverns. They will ensure commitment and continued investment in these pubs to drive growth and maximise their potential. ”
Kevin Georgel, Admiral Taverns chief executive, said: “We are delighted to acquire these high-quality pubs, which are a great addition to the Admiral estate.
“This transaction is an indication of our intention to develop the Admiral business and reinforces our position as the country’s leading community pubs group. We look forward to welcoming these new licensees to Admiral, and to working with them and Heineken to ensure a smooth transition.
“We are confident that these pubs have a vibrant future, and that with our award-winning approach to supporting community pubs, we can help these licensees to maximise the potential of their businesses.”
CBRE advised Heineken on the deal.
Heineken recently announced an £18m investment in its Star Pubs & Bars estate during 2014, through a programme of modernisation, refurbishment and product quality initiatives.
A sensible deal in a nuanced market: Comment by M&C Report deputy editor John Harrington
Things are getting even more interesting in the tenanted pub sector. Admiral’s acquisition of 111 pubs from Heineken UK reasserts the willingness of Admiral’s backer Cerberus to make serious investments in the market, at a time when the newest major player on the block, the May Capital and Avenue Capital-backed Hawthorn Leisure, seemed the group most likely to snap up tenanted opportunities on such a scale.
The deal could prove to be a shrewd move for both parties. I understand that the pubs, located across the UK, but mostly in the north, midlands and Scotland, currently sit at the lower end of the earnings scale of the Star estate.
That doesn’t make them bad pubs - far from it. Around 98% of the sites are currently let on substantive agreements, which is a good sign of stability.
The package has a bias towards the kind of community houses whose fortunes Admiral has proven so adept at reviving in recent years by, for example, developing a basic food offer - many of the 111 have a limited food offer at present, or are entirely wet.
From Heineken’s point of view, the disposal gives its estate a more even geographical spread; it previously had a greater bias towards the north.
The importance of this can be overstated, however. A spokesperson for Heineken said: “Whether pubs are north, south or central isn’t important to us. What is important is the local geography and the location in which they trade. We are primarily focusing on suburban and village pubs with multiple income streams with a strong focus on food.
Star’s trading director Chris Jowsey has previously said he wants all the company’s pubs to be serving food by 2020. The 111 simply didn’t fit the mould.
What does this tell us about the pub property market?
Jonathan Neame, chief executive of Kent-based brewer and pub operator Shepherd Neame, told me earlier this month that the “golden moment” for bargains, as the bigger national pubcos undertook rapid sell offs, ended around 2012.
There’s no feel of a fire sale about Heineken’s disposal. Rather, it’s a piece of logical estate management as the group reshapes its pub portfolio. And the company was fortunate to have a confident buyer willing to take advantage of the opportunity. It’s likely that Hawthorn would have also taken more than a cursory glance too as it eyes similar opportunities to acquire unwanted pub packages.
This latest deal shows that the market for tenanted pubs has entered a more nuanced phase, no longer characterised by a blind rush by national players to dispose, a near-universal desire to get into food, and a general lack of faith in the tenanted model. The next few years promise to be very interesting indeed.
