Greenalls in talks with S&N over disposals

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The Independent Online
HEALTH CLUBS to pubs business Greenalls Group confirmed yesterday that it is in talks with Scottish & Newcastle to sell its lodge, restaurants and pubs business.

The confirmation of negotiations comes after days of widespread media speculation about a disposal, the news propelled Greenalls' shares to a day-high of 400p, before they closed 8p firmer at 378.5p.

A Greenalls statement cautioned that while it had "received expressions of interest from a number of parties relating to the group's businesses ... there can be no certainty that the discussions will lead to a transaction".

Analysts said that Greenalls' division on the block could fetch up to pounds 1bn, with Japanese investment bank Nomura and brewer and leisure group Whitbread touted as possible rival contenders for the assets.

Scottish & Newcastle shares added 14.5p to 616.5p yesterday, while Whitbread shares rose 18p to 832p.

"It's been flagged for the past 12 months," one analyst said. "But we need more detail to assess its impact at this stage."

Industry-watchers queried the workings of any possible deal. While it would allow a rationalised Greenalls to concentrate on its four-star De Vere hotel chain and Village Leisure hotel-cum-leisure centres, Scottish & Newcastle would have trouble absorbing the Greenalls' pubs.

Scottish & Newcastle, which owns about 2,600 pubs, is prevented by a 1989 government order from holding more than 2,739 pubs. Greenalls is offering some 700.

Sutherlands analyst Ben Maitland said: "If Scottish & Newcastle did not have to sell any [pubs] it would be about 4 per cent earnings enhancing to May 2000. But it is likely that they will have to sell some pubs, or release them from their tied status."

There was a more positive assessment of marrying Greenalls' 60-odd discount hotels, which trade under the Premier Lodge name, with Scottish & Newcastle's Lodge Inn chain.

Martin Hawkins, analyst at Greig Middleton & Co, said: "Premier Lodge would certainly give Scottish & Newcastle a material leg-up in that sector."

Whitbread recently failed to pick up some of the 3,500 pubs, which Allied Domecq shareholders approved for sale to the Punch Taverns group last week.