Spirit pub directors agree Greene King takeover

The Spirit pub company has agreed to a takeover by Greene King, the pub and restaurant group that brews Old Speckled Hen and Abbot Ale.

In an announcement ending weeks of talks, the directors of Greene King and Spirit said they had reached an agreement that valued Spirit at £774m, or 115p a share.

The deal has to be approved by regulators at the Competition and Markets Authority and shareholders of both companies. Spirit’s directors said they unanimously recommended the “fair and reasonable” offer that will leave shareholders with a 31% share of the combined business.

If it goes ahead, the merger of two of the UK’s largest pub groups will create a hospitality empire of more than 3,000 pubs and restaurants employing 40,000 staff. The combined group will have around one-fifth of the market for branded pubs.

Greene King has 1,900 pubs and restaurants, including the Loch Fyne and Hungry Horse chains, while Spirit’s 1,200 outlets span Flaming Grill restaurants and John Barras pubs.

Greene King wooed Spirit in an attempt to expand its presence in London and south-east England, where revenues from drinking and dining out are especially strong.

Greene King hopes to save £30m a year, although the merger will heraldone-off costs of £25m. The company expects to reduce staff numbers of the combined group by less than 1%.

In its latest full-year results, Greene King reported pretax profits up 9% to £173m on revenues of £1.3bn. The pub group, which employs 23,000 people, has been battling HMRC in the courts over a highly artificial tax avoidance scheme which has been condemned by politicians of all persuasions. Spirit, which has 17,000 employees, posted revenues of £800m in its last financial year with a £121m operating profit.