Another dealmaking triumph for Clive Watson as Young's buys City Pub Group for £162 million
Serial pub entrepreneur Clive Watson is poised to add another firm to his dealmaking career after City Pub Group said it was set to be bought by pub giant Young’s in a £162 million deal.
The agreement, which will see CEO Watson pocket more than £6 million, is the third chain he has found a buyer for after selling Tup Inns to Massive in 1999 for £4 million and handing Capital Pub Company to Greene King in 2011 for £93 million.
The deal, in which City shareholders will receive a combination of cash and Young’s shares, values the company at a 46% premium on yesterday’s closing share price, but below its pre-Covid market cap. Investment bank Houlihan Lokey, is acting as lead advisor for the deal.
Young’s CEO Simon Dodd told the Standard City Pub Group has a “really good portfolio that is predominantly freehold and in premium locations” providing a “strong opportunity to accelerate our growth strategy.”
Watson, who founded City Pub Group in 2012, hinted that a number of bigger chains had been circling to snap up City and the £162 million Young’s offer was not the first he had received, in an echo of his 2011 deal with Greene King in which he rebuffed an earlier £53 million offer from Fuller’s, adding it “seriously undervalued the business.”
Watson today said: "Mindful of the uncertain economic climate, high interest rates and inflation in particular, and our plans for long term growth as an independent company, initial approaches were rejected.
"However, following careful consideration, we believe the transaction is in the best interests of City Pubs shareholders."
The deal will increase Young’s pub estate by more than 20% to 279, while the number of hotel rooms it operates will grow by 240 to top 1,000 for the first time.
Young’s today said it had sailed past its pre-pandemic performance as Dodd said “the pub is back” and cheered especially strong performance in the Square Mile.
Revenues rose 5.4% to £196.5 million in the six months to October and were now up more than 10% on 2019 trading on a like-for-like basis. Pre-tax profits nudged up 2.5% to £24.5 million as the Wandsworth-based business upped its dividend to 10.88p.
There was “real growth in the City” Dodd said. “What we’re seeing is a pattern of work where people are coming back four days a week rather than three, as well as the return of tourists and shoppers.
“The corporate Christmas party is back too, with an average booking size of ten compared to eight last year.”
63-year old Watson, a lifelong publican, built the City chain from a group of six pubs in 2012, at which time City traded as two separate businesses, City Pub Company (East) and City Pub Company (West). They were merged ahead of a 2017 IPO, which saw the group expand to dozens of premium sites across London, including the Bow Street Tavern in Covent Garden and the Cock and Bottle in Notting Hill.
The firm’s relatively low debt profile of £5.2 million made it an especially attractive acquisition opportunity to larger rivals.
Pub chain Mosaic, which City acquired a majority stake in in June, will also transfer to Young’s as part of the deal.
