Forte sells Harvester pub chain

Pubs and brewing: More consolidation on the way as DTI moves to clear Courage bid while Bass strengthens food business
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The Independent Online
Bass yesterday strengthened its position in the fast growing pub food market by paying pounds 165m cash for the 78-strong Harvester pub chain owned by Forte, the hotels group, writes John Shepherd.

The move brings Bass closer to market leader Whitbread - which sells almost as much food in the UK as McDonald's.

The deal comes a year after Forte took Harvester off the market because bids from potential buyers failed to meet the asking price, believed at the time to exceed pounds 140m.

Competition to buy Harvester this time round, however, has been intense. One industry source said that Whitbread, which owns the successful Brewery's Fayre and Beefeater food pubs, had offered more than pounds 150m.

Bass said the purchase of Harvester would be "substantially earnings enhancing" from day one. The pubs would also accelerate Bass Taverns' plans for developing a "significant presence" in the branded pub catering market.

Food is providing most of the positive news in the pub market, which is generally encountering difficulties from the steep decline in beer drinking over the last 15 years.

More than 50 per cent of turnover of the big branded restaurant pubs comes from food. Most regional brewers now draw more than 18 per cent of sales from food, and the outlook for further growth in this part of the pounds 19bn a year eating out market is good. The Henley Centre of Forecasting predicts spending on eating out to rise to pounds 27bn by the turn of the millennium.

Analysts think that Bass has paid a high price, although they agreed that it was a very valuable brand name to have on board. They also said they would not be surprised if Bass doubled the number of Harvester pubs in the next two years.

There is a shortage of good chains of pubs for sale at the moment, and building from scratch can cost at least pounds 1m an outlet. Whitbread is also experimenting with "super pubs"- involving investments of up to pounds 3m and offering facilities such as ten-pin bowling.

Forte said Harvester had net assets worth pounds 125m and made pounds 14m of trading profits net of advertising costs in the year to January. The company will use the proceeds to reduce the ratio of debt to shareholders funds to 51 per cent. In line with the strategy outlined recently by the chairman, Rocco Forte, this will increase the company's flexibility to invest in its core hotel and restaurant brands.