Greene King Brewery And Pubs Business Sold To Hong Kong Buyer
Interested market observers may have wondered why Greene King shares increased by more than 50% in mid-August, the reason is because Hong Kong-based business giant CKA has taken over the business.
Greene King is a major player in the UK’s brewery, pubs and restaurant sector, owning about 2,700 pubs, hotels and restaurants.
The takeover gives Greene King a valuation of £2.7bn, and is one of many changes to take place in the brewing and drinks sector in 2019 (client insert link to the post written about Fuller’s brewery and London Pride sold to Japanese brand Asahi).
About The Greene King Sale
Nick Mackenzie, the chief executive of Greene King commented that CKA has a business philosophy that aligns with the Greene King ethos.
He said: “They understand the strengths of our business and we welcome their commitment to working with the existing management team, evolving the strategy and investing in the business to ensure its continued long-term growth.”
The deal has been approved by the directors of Greene King and will be recommended to shareholders.
Neil Wilson, who is an analyst with Markets.com commented that this news would be unlikely to please the brand’s customers, even if shareholders were delighted.
He said: “I think we can comfortably expect more pub closures. It’s a whopping [price] that implies CKA sees significant value in the property portfolio.”
At present Greene King and CKA have stated they don’t plan any “material changes” to the group or management staff numbers and have no intention of initiating “any material headcount reductions within the Greene King organisation as a result of the acquisition.”
However, it’s likely these statements can be taken with a huge pinch of salt.
The pubs sector in the UK has been handling a variety of pressures in recent years, including the smoking ban, people drinking less alcohol, and increased costs.
These have led to a number of pub closures, in 2018 alone there were 1,000 pub closures in the UK.
One major reason investors are attracted to the sector, though, is due to the numbers of properties owned by pubs and brewery chains.
For example, Greene King has around 81% of its properties on long leases or under outright freehold ownership.
A recent valuation at Greene King indicated a £4.5bn market valuation of all properties, which was massively in excess of the stated book value of £3.5bn.
CKA is majority owned by Li Ka-Shing, the richest man in Hong Kong, and has business interests encompassing retail, utility firms, and telecoms.
Mr Ka-Shing retired from the business in 2018, and has a very humble background. He started his working life sweeping factory floors.