Stonegate Pub Company’s £1.

27bn acquisition of the Ei Group Shivaum Bapu

Transaction Overview
Summary Profiles

Acquirer Profile Target Profile

• UK-based pub company • UK-based pub company

• Founded in 2010 • Founded in 1991
• Over 765 sites • Over 4000 sites
• Revenue - £853 million • Revenue - £724 million
• YoY Revenue Growth – 10.1% • YoY Revenue Growth – 4.2%
• Financial Advisors: Barclays, Goldman Sachs and Nomura • Financial Advisors: Deutsche Bank and Rothschild & Co

Transaction Overview Merger Inquiry

• Rothschild & Co advised Ei Group on their £1.27bn sale to 14 Feb 2019

the Stonegate Pub Company CMA accept
13 Dec 2019 proposed
Stonegate
• Deal announced on 19 July 2019 amidst concerns from the 6 Dec 2019 offer
undertakings

European Commission CMA undertakings

11 Oct 2019 believes to the CMA
• Deal eventually closed on 20 March 2020 12 Sep 2019
CMA launch
Phase 1
there is an
SLC in 51
• All Cash acquisition – 285p per share European
Commission
merger
inquiry
local areas
refer merger
• Implied EV of £2.97bn to the CMA

Sources: Ei Group plc Annual Report, Stonegate Pub Company Annual Report, Financial Times, Competition & Markets Authority decision document

1
Stonegate Pub Company’s £1.27bn acquisition of the Ei Group Shivaum Bapu

Transaction Rationale
Synergies

Acquirer Rationale Seller Rationale

• Expertise. Ei Group’s management team have extensive
experience in the pub industry with Stonegate absorbing most
of Ei Group’s core team
• Diversification. Stonegate were primarily a managed pub
company but now have leased, tenanted and managed
business units alongside a range of commercial properties
• Market Share. Stonegate are now the UK’s largest pub
company with over 4700 sites across all divisions making them
a clear market leader
• Investment. Stonegate have invested more than £350 million
into its estate since 2010 and have pledged to continue to
invest into Ei Group’s strategy
• Branding. Stonegate’s estate includes popular managed
brands such as Slug & Lettuce and Yates, which would boost
Ei Group’s managed pub business
• Share Premium. Acquisition allows Ei Group shareholders to
exit their investment at a 38.5% premium to the pre-
announcement share price of 206p per share

300
Stonegate Pub Company
13.6% 20/03/2020
285p per share

pence/share
JD Wetherspoons Deal Closing
8.8% 200
17/07/2019
7.3% Mitchells & Butler 206p per share
64.5% Day before
Announcement
5.8% 100
Greene King Plc
20/03/2018
118p per share

Others
0

Sources: Stonegate Pub Company offer document, Gerald Edelman hospitality industry update (Q3, 2019)

2
Stonegate Pub Company’s £1.27bn acquisition of the Ei Group Shivaum Bapu

Transaction Financials
Valuation and Outlook

Precedent Transactions Financing

Target Premium • Sold £1.2bn worth of high-yield bonds on 24 July 2020

Target Name EV (£Mn)
Country Paid • Debt secured against the group’s freehold pubs
Ei Group 2,970 39% • Bond maturing in 2025 offered investors a coupon of 8.25%
• High rates of interest is a sign of investors’ caution about an
Greene King 4,600 51%
industry that has been amongst the hardest hit by Covid-19
Punch Taverns 1,766 40% • However, deal is a sign of recovery in junk bond markets as
Spirit Pub Co. 1,626 52% investors seek higher-yields at a time of ultra-low interest rates

Mean 2,741 46%

Risks Opportunities

• In the short term, a second Covid-19 wave poses a significant Re-openings (% of pre-lockdown numbers)
concern for the industry both for economic uncertainty and Open 11 July
Wet-led pubs
Open 18 July
ability to remain open
Open 25 July
Food-led pubs
• Increasing health awareness has seen declining alcohol Open 1 August
consumption per capita over the past few years 0 20 40 60 80 100
• Competition from supermarkets offers a cheaper alternative by • Pubs remain the country’s number one social destination, with
absorbing tax increases on alcohol 56% of all drink-led visits to pubs
• Rising wage costs and high rates of tax could severely • Pub sector is expected to grow at an annual rate of 2.5% over
constrain profitability the next five years

Sources: Stonegate Pub Co. offer document, CK Asset Holdings offer document, Vine Acquisitions Ltd offer document, Greene King offer document, CGA & Alix
Partners MarketRecoveryMonitor (Issue 21), CGA The British Pub Market