Pub group Marston’s has rejected a takeover offer worth around £690m from US private equity firm Platinum Equity on the basis that it “significantly undervalues” the business.
Having revealed on Friday that it had received an “unsolicited” takeover approach, the company said yesterday afternoon that its board had unanimously dismissed a 105p per share offer having already rejected two earlier proposals made in December worth 88p and 95p a share.
The latest offer represented a 19% discount to the company’s share price at the beginning of 2020, before the onset of the pandemic. Marston’s highlighted that since then, it had completed a “transformative” deal with Carlsberg by merging its brewing division into a £780m joint venture. It also recently announced an agreement to operate 156 pubs previously run by the Welsh brewer SA Brain, which the board said would be “accretive to earnings in the first full year of trading”.
With its business hit hard by the shutdown of the hospitality sector for much of the last year, Marston’s share price has languished close to a 20-year low. It rose by over 6% yesterday to 87p, putting its market capitalisation at £553m.
Marston’s operates around 1,350 pubs and warned towards the end of last year that over 2,000 jobs were at risk due to the pandemic-related disruption in the sector.
Results for the 13 weeks to 2 January show Marston’s pubs generated sales of just £54m. That compared to £1.17bn during the whole of 2019.
The company stated last month that it had the financial headroom to weather the current trading restrictions with its new joint venture with Carlsberg helping strengthen its balance sheet.
A string of British pub groups have been taken private in recent years. In 2019, Ei Group was bought by the private equity firm TDR Capital in a £3bn deal, while Greene King was acquired by the Hong Kong billionaire Victor Li for £4.6bn.
Whilst repeated lockdowns having decimated trade, pub groups are still considered to be good long-term investments, particularly those that have a large portfolio of freehold assets.
Under UK takeover code rules, Platinum Equity, which has investments in a wide variety of companies, has until 26 February to either announce a firm intention to make an offer for Marston’s or walk away.
NAM Implications:
- Key issue is the extent to which Platinum Equity offers await the full impact of Lockdown…?
- Given the inevitable failure of a 100% return to pre-lockdown levels in hospitality.
- Anywhere…
