Spirit consortium wins S&N auction

A consortium of Texas Pacific, Blackstone Group, CVC Capital Partners and Merrill Lynch Global Private Equity have agreed to pay just over £2.5bn for Scottish and Newcastle’s managed pubs business.

The Spirit Amber consortium has beaten off competition from a range of private equity-backed bidders to acquire the UK pubs and restaurant estate put up for sale by Scottish & Newcastle earlier this year.


The Spirit Amber consortium is led by two US buyout firms, Texas Pacific Group and the Blackstone Group, and also includes CVC Capital Partners and Merrill Lynch Global private equity. It also includes Spirit Group Holdings, the UK pubs group which runs 1,000 former Allied Domecq properties, which will be incorporated into the new business.


Spirit beat off the challenge of two other final bids for the business: one from fellow pub chain Laurel that is backed by Cinven and another from Nomura which bid alongside PAI Partners. Kohlberg Kravis & RobertsBC Partners and Terra Firma were among the firms to express an interest earlier on in the auction process.


The £2.51bn price tag is to be settled on a debt and cash free basis and is more than £200m above the book value put on the business by S&N at the start of the auction process, which began in April. This followed S&N’s internal review that prompted the decision to focus on its international brewing operations. Merrill Lynch, Royal Bank of Scotland, Citigroup and Barclays have provided debt for the transaction although further details have not been disclosed as yet.


The sale of the managed retail business of over 1,400 pubs, restaurants and lodges businesses includes the Chef & Brewer, Henry's Bar & Cafe and T&J Bernard brands. As at 27 April 2003, the total estate comprised 1,406 outlets and had approximately 29,000 employees. The business operates throughout the UK, although primarily in London and the south east of England. The business generated turnover of £1.04bn and operating profit of £228m for FY 2002.


Once the deal is complete Spirit will be the UK’s largest pub operator with 2,500 outlets and 46,000 employees. Spirit and S&N have also signed a seven year agreement for the supply of the latter group's brands of beer and cider.


Scottish & Newcastle was advised by Deutsche Bank and UBS. Merrill Lynch advised Spirit Amber.