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Morning Briefing for pub, restaurant and food wervice operators

Tue 5th Jan 2021 - Brains Cardiff brewery faces redundancies, Marston’s sealed deal to run pubs in three weeks
Brains Cardiff brewery faces redundancies, Marston’s sealed deal to run pubs in three weeks: The future of iconic Welsh beer Brains Cardiff brewery is in doubt. According to ITV News, no buyer has yet been found for the brewery and a consultation on redundancies was due to begin on today (5 January). It is understood 80 jobs are under threat. Brains beer has been brewed in the Welsh capital Cardiff since 1882. It’s expected brewing will move to England in the short term. In a statement Brains told ITV News: “Decisions will be made at the end of this process [consultation], which will be the end of January. The Brains brand will continue to live on through both the pubs and the beer.” Last month, SA Brain said that no decision had been made on the future of its management team following the operation of its pubs being taken over by Marston’s. The deal will see Marston’s operate 141 freehold pubs under the Brains brand on a leasehold basis, with effect from February, with rent chargeable from 1 April. In addition, Marston’s will operate the remaining 15 short-leasehold sites on a management contract basis for a period of two years. The circa 1,300 people currently employed in the pub business will transfer across to Marston’s and an initial incremental central overhead of up to £2m will be required to operate the additional pubs. The deal led to questions over the future of Brains chief executive Alistair Darby, who joined the business in July 2018, and the rest of the management team. In response, a Brains spokesman told Propel: “The job today is to communicate the news with the pub teams and the business. There is no decision on the management team at this stage.” Meanwhile, Marston’s chief executive Ralph Findlay has reported the deal to take over the running of the SA Brain pub estate. In a press release issued by Marston’s advisor, Sapient Corporate Finance on the pub deal, it stated: “In order to address Brains’ immediate funding requirements, Marston’s entered into collaborative discussions with the company with a view to preserving the freehold capital value for its stakeholders, protecting Brains’ strong, heritage brand name and, importantly, safeguarding the jobs of the pub teams within the business. The acquisition is in line with Marston’s stated strategy to be a focused pub operator following its disposal of its brewing assets earlier last year. Marston’s sees opportunities to grow earnings in the medium term through conversion to franchise and additional investment opportunities in the estate.” Findlay said: “Sapient’s detailed understanding of the Brains business allowed us to move very quickly on this exciting opportunity with contracts exchanged within three weeks of commencing discussions. The advice and support from the Sapient team during such an intensive period played a critical role in achieving this successful outcome.” Fraser Anderson, partner at Sapient Corporate Finance, added: “Structuring this transaction required a lot of creativity in these very challenging markets. We needed to deliver economic terms that were attractive to Marston’s whilst being sensitive to the objectives of key stakeholders in Brains including shareholders, lenders and employees. It is pleasing to have played a key role in helping preserve the independence of Brains and facilitating Marston’s continued expansion of its pub estate. This transaction, together with Liberation’s acquisition of a portfolio of 21 pubs from Wadworth earlier in December, are the only two M&A deals of scale in the pub sector since March 2020. Sapient advised on both transactions. These two deals demonstrate that acquisitions of quality businesses by leading operators can be executed despite market challenges around valuation and financing. Looking forward into 2021, we are now also seeing considerable appetite from investors to commit capital to the sector.”

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