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Mitchells & Butlers signs Orchid deal

Pub operator Mitchells & Butlers (MAB) has agreed to buy the majority of the Orchid Group estate for £266m.
June 19, 2014

Pub group Mitchells & Butlers (MAB), already owners of Harvester, Toby Carvery and All Bar One, has confirmed it will buy 173 of the Orchid Group’s 220 pubs as well as its headquarters. Mitchells closed negotiations by agreeing to pay £266m for the majority of the estate, 158 of which are freehold or long-leasehold properties.

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Out of the sites bought, Mitchells plans to convert 96 over to its existing brands or formats within the next two years. And while the initial costs associated with the deal and subsequent integration of the estate are guided at £10m, management believes the newly-enlarged portfolio will help it save £6m a year.

The deal consolidates Mitchells & Butlers position as Britain’s largest operator of managed restaurants and pubs, already controlling an existing estate of 1,592 managed sites and 59 franchised businesses. But City analysts have warned integrating the new pubs shouldn't come at the expense of resuming like-for-like sales growth from the existing business.

Painting quite a different picture, analysts at Numis have pencilled in £35m of capital expenditure for rebranding purposes, but also predict Mitchells pre-tax profits could receive a £30m boost thanks to the Orchid deal.