Sorry: I know that isn’t original but it does seem so appropriate. In the current climate it comes as no surprise that Greene King, brewers and operators of around 2,700 pubs – including many in London – has been sold. What is curious is the identity of the buyer. I would not have been surprised, although saddened, if it had been AB InBev or Carlsberg but this has come out of left field. The buyer is a company called CKA Bidco, specially created for the purpose by Li Ka-Shing, said to be Hong Kong’s richest man, and his son Victor, as part of their CKA Group. CKA Bidco is incorporated in the Cayman Islands and listed on the Hong Kong stock exchange. The reported purchase price is £2.7 billion and CKA Bidco will also take on GK’s £1.9 billion debt. CKA Group’s business interests in this country already include the chemists Superdrug and the telecoms company Three plus shares in various utility companies and a substantial property portfolio. They also own 162 pubs which they currently lease to GK. The deal is subject to ratification by GK’s shareholders at the company AGM on 13 September but given that they are in line for a 50% premium, it is hard to see the majority refusing it.
Nik Antona, CAMRA’s National Chairman said, “The news that Britain’s largest pub and brewery company has been sold to an international asset company is very concerning for our beer scene. We are always wary of one company controlling a large share of the market, which is seldom beneficial for consumers. Greene King has been in operation for over 200 years and it is a very sad day to see such a well-known, historic and respected name exit the brewing and pub business. We hope that Greene King will continue its operations as normal without any disappointing changes. We will be calling on the new owners to retain the current pub portfolio to safeguard thousands of pubs and jobs across the country.”
The non-executive chairman of CKA Bidco, George Magnus, was quoted in the Metro as saying that CKA ‘saw the brewer as a good buy because it expected pubs to remain an important part of British culture’, that they will keep to GK’s existing strategy and that there will be no ‘headcount reductions’. That sounds promising but CKA is essentially a real estate company and so it is hard to see them resisting the temptation to ‘rationalise’ GK’s property holdings.
Readers may recall that during a state visit in 2015 the then Prime Minister, David Cameron, took the visiting Chinese president, Xi Jinping, to his local near Chequers, the Plough at Cadsden, and introduced him to GK IPA. It has been a leading brand in China ever since. A Chinese investment company bought the pub shortly after.
The chief executive of the Society of Independent Brewers (SIBA), James Calder said, “Many small independent brewers have beer on the bars in Greene King pubs. We hope yesterday’s announcement won’t impact on the choice both landlords and consumers have when picking a local beer. We look forward to working with Greene King’s new owners to ensure these pubs continue to have access to the widest choice and quality of beer possible that can only come from small independent brewers.”
Taking a wider view, the weakness of sterling has seen investors from China and Hong Kong make a large number of acquisitions in the UK, so this follows a trend. At least one analyst also ventured the view that this might be a good time to move cash out of Hong Kong. GK used to pay substantial dividends to its UK shareholders, not least pension funds who will now lose this particular investment opportunity. There might also be Corporation Tax issues.
Several analysts have speculated that this sale might provoke further takeover activity. Both Fuller’s and Young’s were named as possible targets while the stalemate at Mitchells and Butlers, where half of the shares are split between rival camps, may be broken.
This is a good point at which to repeat what Tom Stainer, CAMRA’s Chief Executive, said to the Morning Advertiser following Stonegate’s takeover of Ei group, “You always see these cycles of expansion and contraction where you suddenly get an explosion of smaller operators and it seems natural the bigger operators will respond to that by making acquisitions. We have seen a trend recently of big, national or even international brewers starting to buy up smaller breweries, maybe that comes with established craft credentials as a response to the development of the beer market. In all businesses, you see this with the big guys who have the buying power, it is part of their strategy. We may see pub companies eyeing up the Stonegate and Ei Group deal, saying ‘we need to compete with that, we need to be of a similar size otherwise we are going to start to lose out’. Changing consumer habits and behaviour is a given and everyone is talking about that. Potentially, consumers have less money to spend and so they are more careful about how they are spending their disposable income on other leisure activities. This means the pub industry has to be much more agile and much cleverer in what they are offering to ensure they are appealing to everyone in society. The industry has thankfully, been talking properly for several years now about diversity and inclusivity. Pubs need to ensure they are getting that right because they can’t afford to be turning away about half of their potential customers (male/female divide) by not offering things that appeal to them.”
Compiled by Tony Hedger from various press cuttings and with some help from John Cryne