LONDON: Marston’s PLC announced the sale of its remaining non-core brewing assets to create a business entirely focused on pubs, with a binding agreement to sell the whole of its 40% interest in Carlsberg Marston’s Limited (CMBC) to a subsidiary of Carlsberg A/S for £206 million in cash.

Justin Platt, Chief Executive Officer, commented: “Today’s announcement represents a significant milestone for Marston’s as we realise our stake in CMBC. In my first six months with the business, it has become very clear to me that our core capability and key opportunity to unlock value for shareholders is in driving a focused and successful pub business.

This deal further strengthens our balance sheet, significantly reducing our debt by over £200 million. In addition, CMBC remain valued strategic partners and we continue to benefit from our ongoing long-term brand distribution agreement with them. Crucially, it allows us to become a pure play hospitality business and focus on what we do best – namely, giving our guests amazing pub experiences. I look forward to delivering on the opportunities a focused pub business will provide to ensure we maximise value for our shareholders.”      

The full exit from CMBC will create a pure play hospitality business focused on pubs whilst retaining the benefits of a long-term brand distribution agreement with CMBC as a key supplier and strategic partner.

Pubs are at the heart of UK socialising, the UK pub market offers significant opportunities to capitalise on and drive value for shareholders. Marston’s pub business is built on strong fundamentals; a suburban-dominated, predominantly freehold estate of c.1,370 pubs combined with a balance of managed and partnership (‘franchised’), tenanted and leased pubs allows the Group to optimise its consumer offering and deliver a highly cash generative operating model.  

This Transaction allows Marston’s to further build on those strong fundamentals and accelerate progress in driving the success of the pub business and demonstrates management’s preparedness to take decisive steps that will drive shareholder value. Further detail on Marston’s priorities and focus will be outlined at an investor day in the Autumn.

In 2020, CMBC was formed to combine the strengths of both Marston’s and Carlsberg, leveraging complementary drink portfolios and an extensive distribution network. Over the last three years, this partnership has played a significant role in enhancing CMBC’s customer offering.

Whilst Marston’s believes that CMBC is well-positioned for future success as a market leader under Carlsberg’s sole ownership, they have been challenged by a number of unforeseen macro and socio-economic factors, including Covid-19, higher operating costs and inflation. Furthermore, as announced on 2 July 2024, the licensed production and distribution agreement for San Miguel with CMBC in the UK will not be renewed beyond 31 December 2024. 

The attractive upfront cash payment reflects the breadth of the CMBC brand portfolio. The offer of £206 million is not subject to any value adjustment mechanism and represents a multiple of 14.5 times EBITDA3 and 24.3 times EBIT4 for the 12-month period ended 31 December 2023. The cash proceeds will provide immediate financial benefits to Marston’s through material debt paydown and ensure that Marston’s can capitalise fully on the opportunities within its core pub business.

Furthermore, the Transaction removes the distraction of non-core assets over which Marston’s has no day-to-day operational control and enables further simplification. The Transaction also removes the corresponding volatility and uncertainty within Marston’s earnings profile.

When taking into account the initial formation of CMBC, whereby Marston’s received proceeds of £267 million[7] and contributed its brewing assets at a valuation representing a multiple of 12.9[8] times EBITDA for the 12-month period ended 31 December 2019, Marston’s will have exited its brewing operations for a total consideration of £473 million. Additionally, Marston’s has received an incremental £54.8 million[9] of dividends from CMBC since 2020. Under the Transaction, no further dividend would be payable to Marston’s.

CMBC will continue to supply Marston’s through the long-term brand distribution agreement (the “SDA”) that was entered into upon formation of CMBC in 2020. The terms of the SDA have been updated without material change, to reflect the end of the joint venture between Marston’s and Carlsberg and termination of the shareholders’ agreement relating to CMBC (the “SHA”). Marston’s looks forward to continuing its strong partnership with CMBC as a customer under the SDA.

The Board of Marston’s has unanimously approved the Transaction and believes it is in the best interest of all of its shareholders.