By Muvija M
(Reuters) – British pub operator Greene King <GNK.L> has agreed to a 2.7 billion pounds cash bid from a Hong Kong-listed company founded by the territory’s richest man, which said it was seeking to increase its presence in Britain.
The offer from CK Asset <1113.HK>, whose founder Li Ka-Shing ranks among Asia’s best-known entrepreneurs, values the brewer of Old Speckled Hen and Abbot Ale at 850 pence per share, a premium of about 51% to its Friday’s close of 563 pence.
CKA already owns a near 3% stake in Greene King, whose shares jumped 51% to match the bid price and topped the gainers on the FTSE 250 midcap index.
The planned deal comes at a time when Greene King, with 2,700 pubs, restaurants and hotels across the UK, has been struggling with a rise in the minimum wage, increased property prices making redevelopment attractive, and a move away from pub drinking among younger Britons.
More than 11,000 pubs shut in the UK in the last decade, a fall of almost a quarter, a 2018 analysis by Office for National Statistics had revealed. (https://bit.ly/2DV3793)
Some saw the move as likely to lead to more pubs closing as CKA, where Li Ka-shing retired in May as chairman and passed the role to his eldest son, looks to cash in on their property value.
“While it’s a bottle of champagne for shareholders, there may be fewer reasons to celebrate for patrons. I think we can comfortably expect more pub closures,” Markets.com analyst Neil Wilson said.
CKA said its strategy was to look for businesses with stable and resilient characteristics and strong cash flow.
“The company believes that the United Kingdom pub and brewing sector shares these characteristics and that pubs will continue to be an important part of British culture and the eating and drinking-out market,” it said in a statement.
The deal would mark the latest in a series of investments by Li Ka-shing’s business empire in the UK, with holdings in retailer Superdrug, utilities Northumbrian Water and Wales and West Gas, and the Port of Felixstow.
Greene King’s directors intend to unanimously recommend its shareholders vote in favour of the deal, which will be funded from CKA’s existing cash resources.
News of the deal lifted shares in rivals JD Wetherspoon <JDW.L> and Marston’s <MARS.L> by more than 9%.
(Reporting by Samantha Machado and Muvija M in Bengaluru; Editing by David Holmes)