Laurel sells pubs to Greene King for £645m

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The management and staff of Laurel Pubs pocketed £6m from the sale yesterday of 432 of its pubs to Greene King for £654m.

The management and staff of Laurel Pubs pocketed £6m from the sale yesterday of 432 of its pubs to Greene King for £654m.

Morgan Grenfell Private Equity, as Laurel's majority owner, will collect the lion's share of the proceeds. It has owned the group since 2001 when it bought Whitbread's 3,000-strong estate and has invested some €200m (£134m) in to the estate. It said yesterday it had made a return of 2.5 times on its original investment.

Greene King is buying Laurel's town and village-based pubs but leaving its high street portfolio behind.

After repaying about £600m of debt, Morgan Grenfell and the management will share about £50m. Ian Payne, Laurel's managing director, and other directors and staff have a 12 per cent stake in the business and Abbey National has an 8 per cent stake. Laurel will be left with 177 high street venues after yesterday's deal, and each party will retain the same proportionate shareholdings in the remaining Laurel business.

The sale has also enlarged the estate of the Suffolk-based brewer of Abbot Ale and Old Speckled Hen by a quarter.

Shares in the company rose to a new high, closing 5.8 per cent up at 1122p.

High street pub chains have suffered from vicious price cuts, so the news that Greene has left behind Laurel's high street venues, which operate under the Hog's Head brand, was particularly welcomed by investors. Tim Bridge, the chief executive of Greene King, now presides over 2,100 pubs. Some 282 Laurel pubs will join Greene King's managed pubs division, where outlets are run by inhouse staff. Some 150 pubs will join Greene King's leased pubs.

As already announced, Greene is funding the acquisition through debt. It has arranged a new £1.2bn finance arrangement with Lloyds TSB.

While Hugh Briggs at Morgan Grenfell said yesterday he and the Laurel management were "delighted with their exit price", some analysts believe Greene King has paid a full price for Laurel's community pubs. James Wheatcroft, an analyst at Investec Securities, said Greene King was paying 10 times earnings. This compares to the 8.5 times earnings paid last year by Spirit Group for Scottish & Newcastle's pubs.

There are hopes that Greene's estimated cost savings are conservative. It has said it expects £6m of cost savings from the acquisition, and also hopes to boost sales of its cash ales through its new pubs.