Marstons Regulatory News (MARS)

25 Jan 2007 07:02

Marston's PLC25 January 2007 25 January 2007 For immediate release Marston's PLC ("Marston's" or the "Company") Acquisition of Nouveaustar Limited ("Eldridge Pope") Marston's announces that it has acquired Eldridge Pope for £155.1 million fromMichael Cannon. The Eldridge Pope estate is an excellent geographical andoperational fit for Marston's existing estate and the acquisition is expected tobe earnings enhancing in the first full financial year following theacquisition. The Board is also pleased to announce that the good start to the new financialyear, as reported in our Preliminary Results Announcement on 1 December 2006,continued over the Christmas and New Year trading period. Commenting on the acquisition Ralph Findlay, Chief Executive of Marston's, said: "We are delighted with the acquisition of Eldridge Pope. It has investedsignificantly in the business in recent years, and offers a high quality wellmanaged estate which complements our existing business both operationally andgeographically. The Eldridge Pope estate should benefit from becoming a part ofMarston's, and offers further opportunity for investment in the future." John Clark, Chairman of Eldridge Pope, added: "We are very pleased to announce the acquisition by Marston's. They are wellpositioned to develop the business further whilst maintaining the core values ofthe Eldridge Pope heritage and culture." A conference call for analysts will be held at 8.45 a.m. today. Please phoneVanessa Laybourn at Hudson Sandler for dial in details on 0044 207 796 4133. Apresentation will be available on the Company's web-site, www.marstons.co.uk,from 8.30 a.m. today. Information on Eldridge Pope Eldridge Pope includes the original Eldridge Pope pub business acquired byMichael Cannon's investment company SDA Limited in 2004, together with the QuePasa high street brand, and Fairdeed, a wholesale business which distributespackaged products and wines and spirits to the Eldridge Pope pub estate. Sinceits acquisition by Michael Cannon, the Eldridge Pope business has beenrationalised and developed into a high quality pub estate. Eldridge Pope will have a continuing estate of 135 pubs based predominantly inSouthern England, and 18 sites to be disposed of. The continuing estate includes95 managed pubs and 40 tenanted pubs, with freehold pubs contributing c.80% ofoutlet EBITDA. Eldridge Pope's managed pubs operate predominantly as traditional communitypubs, with a strong emphasis on food which represents approximately 30% ofmanaged pub turnover. Eldridge Pope has devoted significant resources todeveloping the food offer in the estate, winning the 'Company of The Year' awardat The Publican Food Awards 2006. The managed pub estate also includes 26 pubswith accommodation ('Nostalgic Inns'), and 14 Que Pasa branded bars offeringquality food, drink and entertainment. Eldridge Pope's tenanted estate of 40 freehold pubs is a community pub estatewith the majority of pubs let under traditional fully tied 3-year tenancyagreements. Marston's anticipates that the 18 sites to be disposed of will generate proceedsof up to £10 million within the next 12 months. The continuing estate of 135pubs has a current un-audited run rate outlet EBITDA of £16.9 million, implyingan acquisition multiple of 8.6 times outlet EBITDA taking into account theanticipated disposal proceeds. In total, Eldridge Pope has a current un-audited run rate EBITDA before centraloverheads of £16.0 million, including costs associated with Fairdeed and the 18pubs to be disposed of which are expected to be eliminated through synergies anddisposals. As at September 2006, Eldridge Pope had audited gross operatingassets of £116.0 million. Effects and benefits of the acquisition The Eldridge Pope estate is an excellent geographical and operational fit forMarston's existing estate, in particular strengthening its coverage in SouthernEngland, and providing an increased critical mass from which to extend Marston'sInns and Taverns new-build development programme. The acquisition will provide opportunities to convert appropriate Eldridge Popesites into existing Marston's formats including Pitcher & Piano, Marston'sTavern Table, Taverners Carvery and 2 for 1, as well as to further develop theQue Pasa format in Marston's existing estate. Within the tenanted estate thereis the potential to move the current tenancy agreements to longer term Marston'sPub Company leases over time, and there is scope to improve performance throughinvestment. Both the managed and tenanted pubs offer the opportunity forincreased distribution of beers from Marston's Beer Company. It is anticipated that the acquisition will generate annual purchasing synergiesof approximately £0.8 million, that central overhead costs of £5.0 million peryear will be reduced by approximately £2.9 million, and that costs associatedwith Fairdeed and the 18 pubs to be disposed of will be reduced by approximately£0.9 million. These synergies are expected to be achieved in the first fullfinancial year following acquisition. In addition, Marston's expects to generatea further £1.0 million per year of purchasing synergies in the second financialyear following acquisition. The acquisition is expected to be earnings enhancing in the first full financialyear following the acquisition. Financing The consideration was satisfied in cash and by the assumption of £17.1 millionof debentures and loan notes. As part of the funding of the acquisition, Marston's has replaced its existing£275 million corporate banking facility with £400 million of new facilities. The consideration assumes that Marston's will continue to make scheduledpayments into the Eldridge Pope final salary scheme to eliminate the September2006 audited FRS17 post-tax pension deficit of £9.5 million by April 2015. Following the acquisition Marston's retains balance sheet strength and financialflexibility and, as stated in the Preliminary Results Announcement on 1 December2006, aims to return around £100 million to shareholders this financial yearnotwithstanding the acquisition of Eldridge Pope, subject to retainingflexibility to make further acquisitions should suitable opportunities arise. Current trading At the Annual General Meeting to be held at 12 noon on 26 January 2007, RalphFindlay, Chief Executive, will give the following update on the Company'sprogress since the start of the current financial year on 1 October 2006: "Our good start to the new financial year, as reported in our PreliminaryResults Announcement on 1 December 2006, continued over the Christmas and NewYear trading period. "In Marston's Inns & Taverns, our managed pub division, like-for-like sales were7.0% ahead of last year in the 16 weeks to 20 January 2007. As previouslyreported, like-for-like sales were 9.1% ahead of last year in the 8 weeks to 25November 2006, and in the following 8 weeks to 20 January 2007 were 5.2% aheadof last year. Strong growth in food sales contributed to this good performance.In Marston's Pub Company, our tenanted and leased pub division, trading hasremained good and is ahead of last year. Marston's Beer Company achieved strongvolume and market share growth in premium ale against a weak beer marketoverall, with total beer volumes marginally below last year. "Overall, our performance and cash flow has been in line with our expectations." Enquiries: Marston's 01902 329 516Ralph FindlayPaul Inglett McQueen Limited 020 7484 8800Jim FallonGeorge Fleet Hudson Sandler 020 7796 4133Andrew HayesNick Lyon McQueen Limited, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Marston's and no-oneelse in connection with the acquisition of Eldridge Pope and will not beresponsible to anyone other than Marston's for providing the protectionsafforded to clients of McQueen Limited or for providing advice in relation tothe acquisition of Eldridge Pope. This information is provided by RNS The company news service from the London Stock Exchange