The move follows Capital’s rejection of a £54m offer from Fuller last month, which it had said “substantially undervalued its business”.
However, Greene King came in with an offer of 235p a share for the 34-strong pub company, which marks a premium of 51 per cent on the closing price of 155.5p on 16 June.
Premium food and drink growth
The Suffolk-based brewer said the acquisition of Capital Pubs is an opportunity to create an “even stronger” retailer within London’s growing premium eating and drinking out market.
The combined business will operate approximately 250 pubs within Greater London.
Greene King directors said they see “significant benefits” from operating Capital Pubs alongside the group’s recent acquisition, Realpubs, and its existing premium London pubs. “There are also specific opportunities to grow food and accommodation participation within Capital Pubs,” they said.
“The proposed acquisition represents another firm step as we continue to expand our presence in London,” said Rooney Anand, chief executive officer of Greene King.
“Capital Pubs would bring a further 34 premium pub assets and take our Greater London estate to approximately 250 at a time when London is outperforming the national pub market.
“This offer represents a fair price for a high quality, largely freehold pub estate. Capital Pubs is a premium London pub company that fully meets our criteria as we continue to progress our retail expansion strategy. Capital Pubs' estate fits well within the Greene King portfolio and we intend to combine it with our recently acquired Realpubs business, thereby generating attractive cost and revenue synergies”.
Cultural fit
Capital, which had rejected Fuller’s lower bid last month as “without merit”, said the terms of the current offer were “fair and reasonable”.
“Greene King is an excellent cultural fit with Capital Pubs and will be a good home both for the business and for our staff,” said Clive Watson, chief executive officer of Capital Pubs.
“Greene King is renowned for nurturing the businesses it acquires and I have every confidence that Capital Pubs will continue to develop under its ownership. We have recommended Greene King’s deal to shareholders as we believe it reflects both our high quality business and its prospects”.
The acquisition of Capital Pubs is expected to be earnings enhancing to Greene King in the first full year of trading and will generate returns above Greene King’s cost of capital in year one.