Greene King and Spirit merger still on despite beer-tie vote

The pub companies are still pursuing tie-up despite share price falls following the House of Commons vote to end the 400 year-old beer tie system

Shares in pub companies plunged after MPs voted in favour of an overhaul of the beer tie system
Shares in pub companies plunged after MPs voted in favour of an overhaul of the beer tie system Credit: Photo: Robert Robertson

Pub groups Greene King and Spirit are still pursuing their £773.6m merger despite share prices in both companies falling yesterday after MPs called time on the 400 year-old beer tie system.

The British Beer & Pub Association, along with UK’s biggest pub landlords Enterprise Inns, Greene King, Punch Taverns and Marstons warned on Wednesday that there could be as many a 7,000 job losses across the country with up to 1,400 pubs closing.

At the start of the month Greene King, which operates the Loch Fyne brand of pubs, announced that it had struck a £773.6m cash and stock takeover of Spirit.

Rooney Anand, Greene King’s ambitious chief executive, had said that there would be significant cost savings and synergies of at least £30m a year.

However, industry sources have said that the end of the beer tie, which restricted pub tenants to buying beer and other supplies from their landlords, will impact the combined company.

In its written evidence to Parliament, Greene King, which has operated pubs under the beer tie for 210 years, said that an end to the beer tie would have a "hugely negative impact on the company".

Shares in Greene King fell by 35.5p, or 4.5pc, to 750.5p on Wednesday, reducing the value of the stock portion on offer.

However, people close to the companies have said that the merger is still going ahead and no revisions to terms are necessary.

While tenanted pubs – those affected by the beer tie – will make up 41pc of the combined group’s portfolio, the rest will be managed. The combined company will have 1,800 of managed pubs and 1,300 of tenanted and leased pubs.

Under the terms of the offer Spirit shareholders will own around 28.9pc of the combined company and Greene King will own 71.1pc.

The deal is forecast to close by the first half of next year, but the proposed changes to the beer tie are not intended to come into effect until 2016.

Magners maker C&C is still threatening to gatecrash the deal and can make a rival offer up to 10 days before shareholders are due to vote at a meeting, which may not be until January.

However, the brewer is expected to have to make a full-cash offer in order tro trump Greene King's bid.

Greene King intends to send a circular to shareholders in mid-December and a meeting can be called 21 days after that.