Dublin-based drinks maker C&C Group plc is joining forces with privately held Proprium Capital Partners and the management of pub operator Admiral Taverns in a management buyout. Admiral Taverns is the owner of 845 pubs mainly in England and Wales.
It is currently owned by private equity firm Cerberus Capital Management, which is selling its entire stake. In Greek mythology, Cerberus is the name of the monstrous multi-headed dog that guards the gates of Hell to keep the dead well and truly in.
Cerberus announced its purchase on 3 January 2013. It said at the time that the investment supported continuity in management and strategy for Admiral which at that time had 1,100 pubs. Cerberus bought it from Lloyds Banking Group.
C&C is investing £37m to acquire 47% of Admiral's issued capital. It will fund the investment from existing C&C facilities. Admiral will be accounted for as an associate of C&C. The remaining equity is provided by Proprium Capital Partners and Admiral management.
In technical terms, the debt funding for the acquisition is non-recourse to C&C. In simple English, this means that the debt is being undertaken by Admiral itself. It will not therefore appear on the C&C balance sheet.
C&C says it believes the investment will deliver significant benefits to its British businesses through
- Collaboration with an experienced and skilled management team
- ·Participation in an earnings stream from a tenanted pub estate
- Direct access to 845 pubs through a procurement and supply agreement
- Mid-single digit earnings accretion and attractive returns on equity in the first full financial year following completion
- A long-term commitment from its partners to develop the business
The Admiral business
Admiral's pubs are 95% freehold or long leasehold. They sit in predominantly suburban or city locations and are operated as a tenanted estate. The management team at Admiral will continue to lead the business.
Stephen Glancey, C&C CEO, said: “The local pub remains at the heart of many suburban and city communities – often the hub of local activity and their economic and social contribution is immeasurable.
He adds that C&C has a long and successful track-record of supplying and providing financial support to local pubs within the independent free-trade in Scotland and Ireland.
The pub still a key
“In the UK, the tenanted pub model is a key component of the pub industry,” he says. “When well invested, and with the right operator and product range, it can provide excellent sustainable returns to all participants.
“Admiral management has a proven track record in balancing these returns with the needs of their tenants and consumers. Today’s new arrangements will enhance choice for both tenants and consumers and provide a platform for further growth at Admiral.
Glancey says that for C&C, this is an attractive opportunity to create a new long-term investment in the important on-trade channel, without taking significant financial and operational risk.
C&C brand list
C&C Group plc owns, manufactures, markets and distributes branded beer, cider, wine, soft drinks and bottled water. Its list of brands includes Bulmers, the Irish cider brand, Tennent’s, the leading Scottish beer brand, and Magners, the premium international cider brand.
It also owns a range of niche and super premium ciders and beers, such as Menabrea, Heverlee, Chaplin & Corks and the recently acquired craft cider - Orchard Pig.
C&C Group also owns and manufactures Woodchuck, a leading craft cider brand in the United States and manufactures and distributes a number of third-party international beer brands in Scotland and Ireland.
Listed in Dublin and London
C&C is also a leading drinks wholesaler in Scotland and Ireland, where it operates under the Tennent's and C&C Gleeson brands respectively. It is listed on both the Irish and London Stock Exchanges. The Dublin share price rose 1.25% on news of the Admiral investment.
On 17 May this year C&C reported its results for the year ended 28 February. These showed net revenue down to €559.5m from the €662.6m reported in 2016. Operating profit fell to €95m from €103.2m. Free cashflow was €58.3m against €126.4m a year earlier.