S&N buys Chef & Brewer leaseholds

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The Independent Online
BY JOHN SHEPHERD

Scottish & Newcastle, the brewing company that is trying to buy Courage, has bought the outstanding freeholds of 306 of the Chef & Brewer pubs taken over last year in a £628m deal with Grand Metropolitan.

The latest deal, which was revealed by the Independent last autumn, will cost £198m, and is being done through a joint venture with British Land, the property group run by John Ritblat. All of the 306 pubs were operated on controversial 20-year Inntrepreneur leases.

Analysts estimated that S&N was paying about £20m a year in rent on the pubs. Inntrepreneur leases contain clauses of upward-only rent reviews every five years.

The deal has been in the offing for several months, and, besides the financial benefit, will enable S&N to exert greater management control. S&N has been operating the pubs under licence.

S&N and British Land said they were financing £164m of the purchase cost through bank borrowings. S&N is also paying £2m for 14 short leaseholds from Inntrepreneur and five from Courage, which is owned by Foster's of Australia.

Shares in S&N rose sharply on Thursday night, although the 15p climb to 529p owed more to expectations in the City that the Courage purchase would be concluded before the end of the week than to some minor speculation about yesterday's deal.

S&N shares yesterday gained 2p to 531p, although the stock market reaction to the deal will not be known until Monday as the announcement was made after the close of dealings.

Brewing industry sources said the Courage purchase could take at least another week to finalise. Analysts reckon Courage could be worth around £500m.

There have been several complications during the negotiations, in particular over the rights to beer brands. It is expected that Courage's 50 per cent stake in the 4,350-strong Inntrepreneur pub chain will be retained by Foster's.

GrandMet, the international food and drinks group, owns the other 50 per cent. Inntrepreneur was formed out of a breweries-for-pubs swap deal in the late 1980's between Courage and Grand Met, which once owned the giant Watney Mann Truman brewing company.

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