British brewer and pubs operator Greene King has agreed to a £4.6 billion (€5.02 billion) bid from a Hong Kong-listed company founded by the territory's richest man Li Ka-Shing, which said it was seeking to increase its UK presence even as Brexit looms.
The offer from CK Asset, whose founder ranks among Asia's best-known entrepreneurs, values shares in the brewer of Old Speckled Hen and Abbot Ale at 850 pence each or £2.7 billion in total, a premium of about 51% to their Friday close.
Including debt the deal value amounts to £4.6 billion, though some analysts said the cash value should be higher.
"We would see 950p per share ... as a more attractive exit price to secure shareholder consent," said Shore Capital analysts, noting that underlying trading had improved lately.
Share Price Rise
CKA already owns a near 3% stake in Greene King, also owner of the Chef & Brewer and Hungry Horse chains and whose shares jumped 51% to match the bid price.
The proposed takeover comes after Greene King, with 2,700 pubs, restaurants and hotels across the UK, has like others struggled with a rise in the minimum wage and a move away from pub drinking among younger Britons.
Britain's looming exit from the European Union risks denting the economy but in the meantime the weakness of sterling has made it cheaper for foreign buyers to snap up UK assets.
However, Greene King, which replaced its long-time boss last year, in June posted a higher than expected 1.6% rise in annual adjusted profit before tax to £246.9 million.
Strong Cash Flow
CKA said its strategy was to look for businesses with stable and resilient characteristics and strong cash flow.
"The company believes that the United Kingdom pub and brewing sector shares these characteristics and that pubs will continue to be an important part of British culture and the eating and drinking-out market," it said in a statement.
The deal would mark the latest in a series of investments by Li Ka-shing's business empire in the UK, with holdings in retailer Superdrug, utilities Northumbrian Water and Wales and West Gas, and the Port of Felixstow.
It also comes as the sector sees a wave of consolidation.
Slug and Lettuce chain owner Stonegate last month agreed to buy larger rival Ei Group for £1.27 billion, while Japanese brewer Asahi Group said it would snap up the British beer business of Fuller, Smith & Turner.
Greene King's directors intend to unanimously recommend shareholders vote in favour of the deal, which will be funded from CKA's existing cash resources.
News of the deal lifted shares in rivals JD Wetherspoon , Mitchells & Butlers and Marston's by between 6% and 9%.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
