Greene King Takeover

I've been busy with the Great British Beer Festival and with editing (writing) my local CAMRA Magazine, so haven't had time to blog, but I couldn't help but quickly jot down one or two thoughts about Greene King being taken over by Hong Kong conglomerate CK Asset Holdings for £4.6 billion, including its debt. The Hong Kong company is offering 850 pence per share, a 51% premium to Greene King's closing stock price on Friday.

So there bare facts are that a successful business has bid a premium for another successful business. You know what? That happens all the time. Most businesses don't grow organically, or rather they do, but only to the point that become interesting or successful enough to either take someone else over, or be taken over. It is very much a dog eats dog situation. And a normal one, though in this case exacerbated by the weak pound which makes British owned asets relatively cheap.

There has been a muted reaction to this in the Twittersphere and elsewhere on social media. Roger Protz has been the foremost tweeter with this:

There goes another one! Greene King founded 1799 with deep historic roots in East Anglia to be sold to a Hong Kong property company. Given its base in Bury St Edmunds, is nothing sacred? Will Marston's be next?@GreeneKingIPA @CAMRA_Official

— Roger Protz (@RogerProtzBeer) August 19, 2019

In response, Martyn Cornell hits the nail on the head:

As I said elsewhere, let’s be honest ... nobody’s heart ever leapt at the thought of going into a Greene King pub

— Martyn Cornell (@zythophiliac) August 19, 2019

So there we have it. As Greene King carries little emotional attachment in the mind of most beer drinkers, it was always unlikely that its takeover would have beer fans rushing to man the barricades. That's just how it is, but wait.  Greene King is a big part of the British brewing industry. It owns a large number of pubs - over 2,700 - and these are spread all over the country. Heck we even have plenty of them here in Greater Manchester where, one must admit, they aren't exactly the most popular beerwise.  Their type of beer is not always particularly suitable to local tastes. (See also post below.)

Concerns are, as always in these circumstances, around what the new owner intends to do with its new acquisition. Pubs, by their nature, can be turned into easily realisable cash, by selling them for different use, or for the land they occupy. That though is an ongoing issue as social habits change and custom becomes less, though there are signs that this is bottoming out to some extent.

According to their statements, "CKA's strategy is to look for businesses with stable and resilient characteristics and strong cash flow generating capabilities," said George Colin Magnus, chairman designate of the CKA unit in charge of the acquisition. "The UK pub and brewing sector shares these characteristics."

So, on the face of it, they want the business to continue to generate cash. They have given an assurance along the lines of business as usual (see here for more).  Can we trust this? Doubtful, but the selling off of assets would, where seen as appropriate, have likely happened under current GK management anyway. It is an uncomfortable fact that many pubs are worth far more to the owners as anything but pubs.

So where does that leave us? A largely unloved vertically integrated pub and brewing business has been taken over by someone else who wants to make money out of it. Yes assets will be sold to pay for the purchase. Will vertical integration continue? Tricky one, but the takeover recommendation gives a strong indication that the brewing side will continue.

Nonetheless we will have to wait and see how this one plays out.

Seems CKA already own a number of freehold pubs which are leased to Greene King

The fact that Greene King owns the freehold or long leases on 81% of its pubs, certainly shows the PubCo model with its huge debt, to be a millstone round the neck of the pub industry.  

As this is a cash offer, we can assume that CKA have reserves that need to be wisely used.

So. What's Been Happening?

I've been away and busy with some personal matters, so while the odd Twitter comment kept me in touch while dodging rain in Dumbarton and Albania, I have spent a little time since returning, catching up with what's been going on.  The main chatter is about brewery takeovers - well nearly takeovers in this case. The airwaves are being choked by the dreadful news that one (more) of the darlings of the crafterati has fallen off the shining path and found itself in the arms of, in the eyes of some at least, an unsuitable suitor.  Yes folks, it's the Beavertown Show.  Now reading blogs and other social media, there is lots of righteous indignation as well as a smattering of insight and pragmatism.  You'll have, like as not, read most of it already.  Frankly I can't get too excited about it. I've only ever had the odd Beavertown beer and now, if predictions are to be believed, I'm likely to have much more of it available soon as the unsuitable suitor (Heineken) makes it widely available, but at a much smaller price.  Not exactly a losing position for most. Unless the recipe changes, but that won't happen, will it?

Of course takeovers are nothing new. In my time as a beer drinker I've seen many of them. The usual thing is that it will be good for consumers. Economies of scale, a bigger organisation helping out where needed and of course, the beer will be matched. It won't change. No Siree. But of course, change it did. Or it disappeared altogether.  So there is precedent, though then it was outlets (pubs) the predator was after, but now it is brand and volumes.  The fundamental reason remains the same - to protect and increase market share - whether by acquisition and absorption - or by owning the production one way or another. Elimination of the opposition is the name of the game I reckon. Mind you, in a lot of cases in the bad old days, it wasn't usually a marriage of convenience, but a shotgun wedding, the bride having been knocked up by the suitor by way of a hostile takeover. Nowadays, the complaint seems to be that the bride was busy behind the scenes prettying up for marriage and making herself a "catch". Same outcome, but usually given the ownership, a willing partnership.

Having read quite a few comments, I'd recommend Roger Protz's take. He's seen it all before and I reckon he has the right of it. My comment on Twitter and Roger's response is reproduced below.

Thanks. Well put: "Look at the history and follow the money."

— Roger Protz (@RogerProtzBeer) June 25, 2018

A final thought from me. Business is business, though the ambition to build something called (slightly pornographically) Beaverworld is given as the reason for this. Oh and a shiny new 270,000 barrel brewery as a competitor might well explain the outrage by some. In the real world though there is still plenty decent beer to go at, so move along. Nothing much to see - for the time being at least.

Another thing to catch my eye is the carbon dioxide (CO2) shortage.  CO2  is needed in reasonable sized breweries for many things other than injecting it into beer, so it might affect some of us a bit. I think though this is more good headline stuff than a real worry. CO2 will be back in a gas bottle near you soon.

Right.That's under my belt. Think I'll go to the pub tonight and see if the Beavertown is on offer yet. 


Two beers that both required CO2 are shown to illustrate this article.  One is craft and was reassuringly expensive. The other was Albanian and therefore wasn't.

 I do feel the pain of some. My beloved Higsons Bitter has gone forever. It still hurts.

We Forgot We Were Brewers!

Speaking to Scotland on Sunday, Scottish and Newcastle's boss Jeremy Blood (who has been with them since 1988) said about the takeover by Heineken " S&N had become a deeply unpopular company among mainstream beer drinkers. In a sense Heineken has changed all that. There is some truth to say that British plcs chasing the next six months' results are forced into taking shorter-term decisions. We lost some of our reverence for beer, we cut corners. It (the takeover] has reinvigorated our passion for beer. We used to call them manufacturing sites. Now we call them breweries or cider mills. It's a small change, but it is significant."

Don't worry though, Heineken have sorted it all out already. Interestingly, "premiumisation" is the answer. In other words we are drinking less, so charge more for it. Oh and serve it in smaller measures. Blood also wants to move away from beer being sold like beans in supermarkets by "decommoditising" it over the next ten years. He also thinks lager might be better served in different draught sizes and smaller, more elaborate glasses with a large head, as our tendency to drink pints does not allow for much difference in price between lower and higher end products. It would have been good if he'd mentioned such things as quality, individuality and taste, but I suppose that would be too much to ask.

While it is nice that S&N are thinking like brewers again, it is a pity they didn't think more like brewers when they actually were .

Dusanj Brothers Back at Helm at Cains

As widely predicted, not least of all here, it seems that the Dusanj brothers who took Cains to bankruptcy and receivership following their disastrous takeover of Honeycombe Leisure, have picked up Cains brewery and nine leasehold pubs from the administrators. They are also seeking to buy 26 more freehold pubs from the former Honeycombe estate. The amount paid was not disclosed.

In a week where the foundations of capitalism have been rocked to the core, the £30 million losses, now nothing to do with the "new" owners, pale into insignificance. Most of this money is owed to HBoS and HMG, who I suspect have other things on their mind at the moment.

Clever pair of buggers these two, but despite my misgivings about it all, I'm glad Cains is saved!

Budweiser Budvar next in InBev's Sights?

With its $52 billion takeover of Anheuser-Busch safely in the bag, one side effect may be that Budweiser Budvar may well become a target for the world's biggest brewing company. InBev inherits more than 100 legal disputes, mostly over versions of the Budweiser trademark, in more than 30 jurisdictions around the globe. Batting for the other side is Czech state-owned brewery Budejovicky Budvar, which has Bud and Budweiser brand trademarks registered in 28 European and 37 non-European countries. Anheuser sells Budweiser in 16 countries and the Bud brand in 15.*

Anheuser and Budvar have fought for solo control of the Budweiser brand for a century, though with more ferocity in the past decade as Budvar’s exports have increased. One way out for InBev would be to buy Budvar. That could cost more than $2 billion, the price being high due to the value of the Czech brewer’s Budweiser trademarks. The Czech government is preparing to sell Budvar before its term of office ends in 2010.

The Wall Street Journal says "When asked if AB-InBev would like to acquire Budvar and its trademarks, InBev spokeswoman Gwendoline Ornigg said: “Timing for [acquiring Budvar’s Budweiser trademarks] has to do with the Czech government, however, and its plans for privatising Budvar. We have great respect for their brand and would like to reach a mutually beneficial agreement.”
We can see the way that one is heading I reckon.

* Source - Wall St Journal

A-B Raises the White Flag

According to the BBC, so it must be right, the US brewer Anheuser-Busch has agreed to be taken over by Belgium-based InBev, in a move that will create the world's largest beer maker.

The $50bn (£25bn) takeover bid by InBev, which makes Stella Artois beer, was accepted by Anheuser's board. The combined company will now be called Anheuser-Busch InBev.

That trips off the tongue doesn't it?

Duvel Acquires Liefman's

As previously reported here and elsewhere, Duvel Moortgat has acquired the whole production rights from the receiver of the bankrupt Liefman's Brewery. In a press release which is short and to the point, the company said "On 24 June 2008, Duvel Moortgat nv reached an agreement with the receivers of Brouwerij Liefmans nv.

On the basis of this agreement, Duvel Moortgat nv acquires a large portion of the assets of the bankrupt companies, including the complete machinery, all the brands and recipes.

Earlier, Duvel Moortgat nv had already made a binding offer on the real estate of Brouwerij Liefmans nv in Ouderaarde. The receivers have granted Duvel Moortgat nv a right of use until the completion of some procedural aspects of the sale of this site.

In the first phase, Duvel Moortgat nv will concentrate primarily on the brown ales and fruit beers of the brand Liefmans brewed in Ouderaarde. This way, Duvel Moortgat nv can complete its existing product portfolio with a fine, authentic and traditional beer brand, in a market segment in which it was not active until now.

When Duvel Moortgat nv acquires the site in Ouderaarde, the company will make the necessary investments to revalue the production site and give visitors a hearty welcome.

The price of the total transaction, including the real estate in Ouderaarde, amounts to 4.5 million Euro."

Good news I reckon and it certainly seems they are getting a bargain at that price. I have visited both breweries and have to say the welcome at Duvel was second to none. They are a good and friendly outfit. Here's hoping they make a good fist of it. I'm sure they will.

For some reason I don't understand, the brewery is quoted by Duvel as being in Ouderaarde. It is of course Oudenaarde!

Game On!

I mentioned a few weeks ago that it looked like InBev of Stella fame would make a bid for Anheuser-Busch the American number one, thus creating the world's biggest brewer by far. Well it's happened. The Budweiser brewer admitted it had received a bid of $65 a share yesterday from Inbev. The $46 billion offer represents a 35% premium on the 30-day average share price and an 18% premium on its all-time high share price, recorded in October 2002.*

This, in other words, is a mighty, powerful and possibly knock out bid. Watch this space.

* Full story in the Morning Advertiser here

InBev to bid for AB?

Industry speculation is rife that InBev, Belgian based makers of Stella Artois is preparing a giant £23 billion ($46 billion) bid for St Louis based Anheuser Busch, brewers of Budweiser and other such tasteless fluids

It seems likely though that if this is going to happen, it will get nasty, as it is thought that the Budweiser Chairman, August Busch IV from the founding family, will resist such a move and InBev will appeal directly to AB shareholders.

"Will it affect me I hear you ask?" Unlikely from the UK market point of view, but it will create the world's largest brewing company by far, with a dominant position in many world markets and that is never good news for those interested in quality beer.

You can read more about it here.