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Fri 24th Jan 2020 - Update: Marston's trading update, CMA launches Just Eat deal investigation, Chilango
Marston’s lfls sales up 1.0%; plans further disposals: Marston’s, the brewer and pub operator, this morning announced that it saw a 1.0% increase in total managed and franchise like-for-like sales growth for the 16 weeks to 18 January 2020, which the company said reflected continued growth in drinks sales offset by weaker food sales. The Ralph Findlay-led business said that trading over the Christmas fortnight was strong, with like-for-like sales growth of 4.5%, which compensated for more subdued trading in the first three weeks of December as a consequence of poor weather. The company said that costs have generally been in line with the guidance it provided at its preliminary results in November. However, it added that the recently announced 6.2% increase in the National Minimum Wage from April is higher than anticipated, and will increase second half year costs by a further c£2-3 million. In terms of its drinks arm, Marston’s Beer Company, it said that volumes were slightly behind last year reflecting a “weaker performance in the off-trade in December, particularly with lager sales”. The company added that excluding lager, volumes were in line with last year. It said: “Given the margin profile of the off-trade, despite the volume decline, earnings are in line with our expectations.” The company has previously set out its intention to reduce borrowings by £200m by 2023, with the intention to generate annual net cashflow of at least £50m after dividends by that time. The company said: “We are focussed on achieving this target as quickly as possible, principally through the acceleration of our disposal programme. In the year to date, we have completed or exchanged on £60 million of disposals. Having originally targeted £40 million of disposal proceeds, we increased that to £70 million in November 2019 and today further increase the target to £85-90 million.” Findlay, chief executive, said: “Marston’s has delivered a creditable performance in a challenging market. Trading in the key Christmas fortnight was good and has remained solid since which is encouraging. Our balanced pub portfolio enables us to perform well in the context of current market dynamics and our market-leading Beer Company has continued to increase market share in both the on and the off trade in the period. We are making excellent progress on our debt reduction strategy, well ahead of the original 2023 target. Looking forward, greater clarity on the political agenda should positively impact consumer confidence. Overall the economic environment for the consumer looks encouraging with low unemployment and healthy wage growth providing us with increasing confidence that the market will grow in 2020.”

CMA launches last-minute review of Takeaway.com Just Eat deal; timetable revised: Takeaway.com’s proposed c£5.9bn acquisition of Just Eat, which was signed off by European authorities two weeks ago, is to be reviewed by the Competition and Markets Authority (CMA), forcing the timetable for the transaction to be revised. This morning, the CMA confirmed it was to launch an investigation into the proposed acquisition. It said it was considering whether the deal will result in a “substantial lessening of competition” in the respective market. The CMA invites comments on the transaction from any interested party by the deadline of 6 February. A takeover battle between Takeaway.com and Prosus for Just Eat ended earlier this month, after Just Eat shareholders accepted the former’s bid, which would create the takeaway delivery sector’s biggest firms. However, the deal will now face scrutiny from the CMA. The Amsterdam-based Takeaway.com announced after the close of trading yesterday that it understood that the regulator intends unexpectedly to conduct a targeted investigation focused on assessing whether Takeaway.com would, absent the Just Eat transaction, have re-entered the UK market. The Dutch firm said its previous foray into the UK market was “unsuccessful” and only raised £76,000 in annual revenues before it closed in 2016. It confirmed that it “did not have the intention to re-enter the UK market absent the transaction with Just Eat” and said it is confident it can secure clearance for the deal. Takeaway.com said together with its advisers it will work with the UK monopoly regulator to respond to any questions it may have and is confident that merger clearance will be obtained. Under CMA rules, Just Eat and Takeaway could still close their deal during the investigation. But the two companies are expected to face an “enforcement order” that would stop them from being integrated while under review. This morning Takeaway.com said that in light of the possible CMA investigation, the company had revised the expected timetable for the deal, effectively delaying it by one week. It said the combined company will be re-named “Just Eat Takeaway.com N.V.” on 31 January 2020, and the shares will trade under the ticker “JET” on the London Stock Exchange, and will continue to trade under the ticker “TKWY” on Euronext Amsterdam. Trading in the company’s shares will commence under the new name Just Eat Takeaway.com with effect from 3 February 2020. At the end of last year, the CMA launched an in-depth investigation into Amazon’s investment in Deliveroo after the two companies decided against offering concessions to get the deal over the line. The CMA had raised concerns over the $575m (£437m) investment at the start of December, saying it could potentially limit competition and push up prices in the online food delivery and grocery market.

A number of Chilango bondholders decide to cash out: A group of investors in the mini bonds offered by Chilango have decided to cash out their investments, rather than wait to see if the company would pay out in the future. At the end of last year, those that took part in the Chilango’s ‘burrito bond’ fundraise between October 2018 and April 2019, which raised £3.7m, were given the option of either receiving 10p in every £1 they invested or swapping their mini-bond debts for debt-like shares, which promised returns sometime in the future. Now according to recently filed documents related to Chilango’s Company Voluntary Arrangement (CVA), 14 bondholders who collectively invested £47,500 in the company’s mini-bonds voted to cash out their holdings for a total of just £4,750. Emails sent out to some creditors on 30 December revealed enough of the firm’s shareholders had voted in favour of Chilango’s proposal to transfer the company’s mini-bond debt into a new form of equity. It meant investors in its 8% burrito bonds no longer faced the prospect of automatically losing 90p in every £1 they invested without any say, but the new debt-like shares they could be left with still does not guarantee them the returns they signed up for. A letter previously sent to bondholders told them the preferred equity “will attract an 8% annual dividend going forward”, which will be paid “when the directors consider it appropriate”, and “if there is available cash”. At the start of this month, Chilango’s CVA proposals were approved after receiving the support of the vast majority of the group’s creditors and shareholders, with 84% voting in favour of the arrangement for Mucho Mas Limited (the primary trading entity) and 98.6% voting in favour of the Chilango Bonds arrangement. This included 75% of Chilango’s landlords. The shareholders also approved, by a near 90% vote, the creation of a preferred share class. As part of the CVA proposal, the company will also exit leases for unopened sites in Bristol, Leeds and Brighton, plus its former site in Camden, now sublet to German Doner Kebab. It also proposes to cut rents by 40% at its sites in London’s Leather Lane, Birmingham and Boxpark Croydon. The steps are part of the company’s plans to get a grip on its finances and its £6.9m debt pile.

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