UK: Heineken agrees to buy 1,900 Punch Tavern PLC pubs across the UK

Heineken NV struck a £305 million ($383 million) deal on December 15 to nearly triple the number of pubs the Dutch brewer owns across the U.K., pushing further into a high-margin business that will allow it to sell more Heineken brands here, Reuters reported.

Heineken has agreed to buy 1,900 Punch Taverns PLC pubs from private-equity company Patron Capital Advisers LLP. The deal would follow Patron’s acquisition of Punch Taverns—which owns a total of about 3,000 pubs—in a transaction valuing the U.K.’s second-largest pub chain at £402.7 million. Heineken’s payment for its share of Punch’s pubs includes the assumption of £962.3 million in debt.

Heineken first entered the U.K. pub market in 2008 with its acquisition of Scottish & Newcastle’s operations here. It owns 1,049 pubs, which it says have helped it reach consumers directly, allowing it to test-market new draft beverages while learning what pub managers want. Pubs also are a higher-margin business than selling beer in the U.K. through other channels.

The December 15th’s deal would turn Heineken into the third-largest pub operator in the U.K.

Pub owners decide which beers are stocked and how they are showcased, so owning more pubs means Heineken will get to sell its brands — such as Heineken and Amstel — more widely and raise their visibility.

Expanded pub ownership will also give Heineken more heft when negotiating with other brewers or pub owners because it can strike reciprocal supply agreements, said Société Générale analyst Andrew Holland.

“Heineken’s move looks strange in the context of a marketing-led international brewer but reflects the realities of the U.K. beer market, which is unlike any other in the world,” Mr. Holland said. Anheuser-Busch InBev NV, Molson Coors Brewing Co., Heineken and Carlsberg A/S all compete head-to-head here with similar market shares. “By buying pubs, Heineken is seeking to capture more of the value chain,” Mr. Holland said.

Roman colonizers built Britain’s first pubs as places where travelers could stop for rest and refreshments. The number of U.K. pubs has been declining for decades, falling to 50,800 last year from 67,800 in 1982, according to the British Beer and Pub Association. The industry blames restrictive opening hours and high taxes, but more Britons are drinking cocktails and there is increased competition from cocktail bars, restaurants and supermarkets.

Heineken said on December 15 that it believes “pubs are an integral part of British culture and that high-quality, well-invested pubs run by skilled and motivated operators will continue to prosper.”

Punch Taverns shares jumped 7.9% in London, while Heineken fell 0.7% in Amsterdam.

16 December, 2016