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Greene King buys Spirit Pub Company for $1.24 billion

Staff writer |
Greene King has agreed to buy Spirit Pub Company for 774 million pounds ($1.24 billion), a deal that will boost its network of food-led pubs.

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The deal creates one of the biggest pub groups in Britain, with over 3,000 pubs, restaurants and hotels.

The acquisition of Spirit's 794 managed pubs, which make up almost 90 percent of the firm's 800 million pound revenues, will boost that aim, strengthening its offer against rivals such as Marston's (MARS.L), M&B (MAB.L) and Wetherspoon (JDW.L).

"Spirit is an opportunity to accelerate a stated strategy, the centre of gravity of Greene King toward retail in broad terms, and food specifically," Greene King boss Rooney Anand said, adding the industry was "ripe" for consolidation.

The offer values each Spirit share at 115p, comprising 0.1322 new Greene King shares and 8p in cash, based on Greene King's closing price on Monday, a 52.2 percent premium to Spirit's September 22 closing share price prior to the offer period.

The offer, including the cash payment, implies an enterprise value multiple of approximately 10.2 times Spirit's 2014 core earnings. That compares to a sector average of 9.4x for the next 12 months.

The proposed deal, which is expected to complete in the first half of 2015, would result in Spirit shareholders owning about 28.9 percent of a combined new Greene King. Around a third of Spirit investors are already Greene King shareholders.

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