The combined business will operate around 5,000 outlets, positioning Stonegate as the UK’s largest pub group.
The merger opens another chapter in Stonegate’s ambitious business development strategy. The company was founded nine years ago, when it acquired 333 Mitchells & Butlers outlets. Since that time, Stonegate has pumped in excess of £350m into its estate, acquiring a variety of branded pubs and bars including Walkabout and Yates. Since then the firm, which today operates 765 sites, has grown in size and scale through a series of strategic acquisitions.
The deal values Ei Group at 38% more than its closing share price yesterday evening and represents a multiple of approximately 11.4 times its underlying EBITDA of £261m for its last financial year.
Ian Payne, chairman of Stonegate, said it was an “exciting prospect” to bring the two businesses together to create a diversified pubs group with significant industry expertise.
“At Stonegate, we have an established track record of running successful pubs throughout the UK – with over £350m having been spent on capital expenditure at Stonegate since it began trading in November 2010. We plan to leverage our existing managed house infrastructure, portfolio of formats and access to capital and invest in the combined estate for the benefit of all stakeholders.”
Robert Walker, chairman of EIG, described the commercial benefits of combining the companies as “compelling”.
He reasoned: “Stonegate is committed to continuing to invest in the business for the future benefit of the combined business, tenants and employees. The EIG Board believes that this is a combination it can recommend with confidence to shareholders and stakeholders alike.”
EI, formerly known as Enterprise Inns, owns more than 4,000 pubs across England and Wales and has more than 1,800 employees. Meanwhile, private equity backed Stonegate has more than 765 operating outlets.