Heineken N.V. announced today that it has acquired the Galaxy Pub Estate (‘Galaxy’) in the U.K. from The Royal Bank of Scotland (‘RBS’) for ?412 million (€480 million) on a cash-and-debt-free basis. A further ?10 million (€12 million) has been paid to settle accrued amounts owed under an existing management agreement between RBS and Heineken.
Galaxy consists of 918 high-quality, largely freehold pubs and has been managed by Scottish & Newcastle Pub Company (‘S&NPC’), a Heineken subsidiary, since 1999 on behalf of RBS. Galaxy will be combined with Heineken U.K.’s existing portfolio of 462 outlets. Following this acquisition, Heineken will become one of the leading pub owners and operators in the U.K.
The provisional fair value of the pubs on Heineken’s balance sheet will be ?378 million (€441 million), implying a multiple of 7.2 times based on a trailing 12-month EBITDA of ?52.3 million (€61.0 million) for the estate. The early amortisation and termination of associated contracts under the acquisition is expected to give rise to a one-off, pre-tax P&L expense for Heineken in 2011 of ?28 million (€33 million). This will be treated as an exceptional item in the fourth quarter of 2011. Heineken expects the acquisition to be earnings accretive from December 2011 and value enhancing in the first year after completion.
Commenting on the transaction, Didier Debrosse, Regional President Western Europe for Heineken, said: “Today’s acquisition of Galaxy is consistent with our strategy of driving future value growth in Europe and represents another step in the successful turnaround of our U.K. business. Our ownership of this estate strengthens our leading position in the U.K. beer and cider market, particularly in the valuable on-trade channel.”
Stefan Orlowski, Managing Director of Heineken U.K., added: “There continues to be an important role for the great British pub in the U.K. on-trade, and this acquisition is a significant vote of confidence in the channel. Owning the Galaxy freehold will allow us to continue the successful transformation of our pub business, concentrate on operational excellence and deliver long-term value from a high-quality, well invested pub estate.”
The agreement has no impact on S&NPC’s existing lessees, who will continue to trade on a ‘business as usual’ basis.