UK: Heineken to acquire RBS Galaxy Pub Estate
Heineken to acquire Galaxy Pub Estate from Royal Bank of Scotland
The UK arm of Heineken is set to become one of the largest pub owners in the country after agreeing to buy the Galaxy Pub Estate from Royal Bank of Scotland for GBP412m (US$646m).
Galaxy's 918 pubs are already managed by Heineken's subsidiary, Scottish & Newcastle Pub Co (SNPC), which itself owns a further 462 pubs outright. The GBP412m price tag is on a cash-and-debt-free basis, Heineken said today (2 December).
The deal makes Heineken one of the UK's largest pub operators at a time when the country's on-trade is struggling amid duty tax rises and stronger competition from retailers. "There continues to be an important role for the great British pub in the UK on-trade," said the MD of Heineken UK, Stefan Orlowski. "This acquisition is a significant vote of confidence in the channel."
For SNPC and Royal Bank of Scotland (RBS), the deal marks something of a reversal. Ten years ago, RBS acquired the pubs, now known as Galaxy, from SNPC for GBP450m, a 9% premium on today's deal. Rumours of a fresh sale have swirled for the last couple of years. RBS has sought to cut debt after being bailed out by the UK Government, which retains majority control of the bank.
Heineken said that it has paid a further GBP10m to RBS to settle fees owed as part of SNPC's management of the estate. It added that the acquisition values Galaxy at 7.2 times trailing EBITDA.
Despite the problems faced by the UK on-trade, the category offers higher margins than the off-trade and Galaxy's estate is geared towards "high quality, largely freehold" pubs, according to Heineken. "Our ownership of this estate strengthens our leading position in the UK beer and cider market, particularly in the valuable on-trade channel," said Heineken's president for Western Europe, Didier Debrosse.
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