Heineken buys 1,900 UK pubs
Additions will up Star Pubs & Bars to close to 3,000 pubs
A brewer at heart and by trade, Heineken is taking a big step forward to becoming a key player in the UK pub industry with plans to acquire 1,900 tenanted and leased Punch Tavern outlets.
In a two-part transaction that was announced this week, private equity fund Patron Capital has created a ‘BidCo’, newly incorporated Vine Capital, to acquire Punch’s more than 3,300 pubs. Out of this Heineken is to acquire the majority of these pubs, with Vine to own and operate the remainder.
Stefan Orlowski, Heineken regional president Europe, commented, “The transaction is a significant step forward in our strategy to unlock value in the UK pub market. The performance of our Star Pubs & Bars business clearly shows that well invested pubs, in the hands of skilled and ambitious independent operators can outperform.
Heineken ultimately plans to incorporate the Punch pubs with its existing Star Pubs & Bars, a 1,049 unit estate that dates back to the Heineken-Carlsberg takeover of Scottish & Newcastle.
This will take some time, perhaps up to a year. The transactions are subject to approval by UK competition authorities, and subsequently there’s a six-month agreement in place for Punch to continue managing the estate while Heineken integrates the pubs into Star.
The 1,900 pubs are spread across England, Wales and Scotland – there are none being acquired in Northern Ireland – and are said by a Heineken spokesperson to fit will with the existing estate. “We think our optimal scale is ideally around 3,000 pubs,” he said.
The intention is to invest in the new estate, to improve returns. Heineken points to a track record of investing transformational sums of capital in its Star estate, on average £20 million each year from 2014.
The spokesperson explained, “Its money going into pubs. We want attractive fantastic thriving pubs. And we have a rolling capital programme to do that. So hopefully it’s good news for the consumer and good news for the licensee to do that.”
That said, as is the norm of large pub acquisitions, some of the acquired pubs will be divested – the tail end – with the number and location have yet to be determined.
And it’s also about selling more of the Heineken brand portfolio. The spokesperson indicated that Heineken currently accounts for 20% of beer volumes being sold in the Punch pubs that it is acquiring. In contrast, Heineken brands account for 85% of beer volumes in the existing Star estate.
The Heineken UK spokesperson indicated that during the transition period it will be the intention to meet with Punch licences to evaluate on a one to one basis what will work best in stocking beers.
It’s worth noting that Heineken’s involvement in the UK pub ownership on such a scale is unique for the multinational brewer in its many markets worldwide. It’s also possibly the only instance where a multinational brewer of any description has such a sizeable pub estate. Could this be the model for future acquisitions in other markets – or does it just speak to the unique centuries old relationship in Britain between brewer and publican?