Fuller, Smith & Turner (FSTA) surprised markets last week with the sale of its entire beer and brewing business to Asahi Europe for an enterprise value of £250m, or 23.6 times cash profits. Chief executive Simon Emeny called it a “difficult decision” to come to, and said that the sale comes with a “heavy heart”. While the sale of such an established British brand to a foreign owner may disappoint some, it should come as good news to shareholders, who will see some of the proceeds of the deal returned to their pockets.
Under the terms of the transaction, the entirety of Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling and distribution go to Asahi, as well as the Griffin Brewery in Chiswick, Cornish Orchards, Dark Star Brewing and Nectar Imports. But punters shouldn’t fear that their favourite ale will disappear from Fuller’s pub taps – the company will form a 10-year long-term supply agreement, with Asahi acting as a supplier.
The UK beer market has become skewed in two directions – towards big internationals at one end and small craft brewers at the other. With Fuller’s sitting somewhere in the middle, Mr Emeny felt that the company “had taken the brands as far as we could”. Asahi is looking to expand its presence further into the UK, following on from its purchase of Peroni last year.
It’s expected that between £55m and £69m of the £205m net proceeds will be returned to shareholders, although Mr Emeny was keeping mum about when and how this would happen. Analysts at Numis expect net debt to fall to £61m, or 0.9 times cash profits, leaving Fuller’s in a position from which the pub estate should be able to “grow rapidly”.
Fuller’s will now focus on its pubs and hotel business, which currently generates 87 per cent of its operating profit and is a higher margin operation than capital-intensive brewing. Mr Emeny confirmed that the pub company would look to make acquisitions, but could not give further details. However, analysts at Liberum thought City Pub Group (CPC) could be in their line of sight.
