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Thu 12th Sep 2019 - Ei Group shareholders overwhelmingly approve £3bn acquisition by Stonegate
Ei Group shareholders overwhelmingly approve £3bn acquisition by Stonegate: Shareholders of Ei Group have overwhelmingly approved the company’s £3bn acquisition by Stonegate Pub Company. A total of 96.57% of shareholders voted in favour of the deal at the court meeting, while 99.98% approved the special resolution to implement the court-sanctioned scheme of arrangement. The deal sees Stonegate buying circa 4,000-strong Ei Group for 285p a share, a 38.5% premium to the closing price of 205.8p per share the day before the deal was announced in July. The acquisition values Ei Group’s entire issued and to be issued ordinary share capital at about £1.27bn. The terms of the acquisition imply an enterprise value of £2.97bn and a multiple of about 11.4 times Ei Group’s underlying Ebitda of £261m for the financial year ended 30 September 2018, adjusted for the disposal of 370 commercial properties. The deal is expected to complete in the first quarter of 2020. The new-look business would be led by Stonegate chief executive Simon Longbottom with his Ei Group counterpart Simon Townsend and the entire board stepping down.

Douglas Jack – Shepherd Neame has been through year of transition but pub estate continues to trade well: Peel Hunt leisure analyst Douglas Jack said Shepherd Neame has been through a “year of transition” but the pub estate has continued to “trade well”. Issuing a ‘Buy’ note on the shares with a target price of 1,325p ahead of the company’s full-year results later this month, Jack said: “Managed (40% of profit) like-for-like sales grew 4.1% in the first half against a comparable of 2.1% with like-for-like drink sales up 5.8% (versus 2.3% comparable), like-for-like food sales up 2.2% (versus 0.2% comparable) and accommodation up 0.7% (versus 6.4% comparable). Our full-year forecasts assume like-for-like sales rise 2.75% despite the comparable softening slightly in the second half. The company is keeping its estate well invested. We are aware of two pub acquisitions during 2019E – The Compton Cross in Charing Cross Road, which has traded as a pub since 1731, and The Cheshire Cheese in Little Essex Street, both in London. Shepherd Neame also added the Samuel Pepys and the Savoy Tap to its London pub estate in the previous year. The company’s largest current project is the new pub hotel at Castle Hill, Ebbsfleet, which should open by the end of 2021E. We forecast managed Ebit margins to be up 50 basis points following an 80-basis points increase in the first half. Even though overall cost pressure has eased over the past year (especially in property), we assume no growth in margins in the second half due to assuming slower like-for-like sales in the second half. Tenanted (57% of profit) like-for-like Ebitdar rose 2.2% (versus 2.1% comparable) in the first half with average Ebitdar up 4.0% due to there being four fewer outlets. In the first half there were £0.2m additional repair costs, which we estimate took almost 3% off the growth in like-for-like Ebitdar. For the full year, we forecast 2.0% like-for-like Ebitdar growth reflecting slightly tougher comparables in the second half. In the first half, Shepherd Neame refinanced its debt, increasing its facility to £107.5m versus 2019E forecast net debt of £82m. This provides the basis to step up expansion or make pub acquisitions if the right opportunities arise. We forecast the net asset value per share reaching £16.64 in 2021E, including last year’s revaluation uplift.”

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