Fri, 03 Feb 2023 | COMMERCIAL PROPERTY
Stonegate Group, the UK’s largest pub company, is reportedly planning to sell off around 1,000 sites as it looks to pay off some of its £2.6 billion debt pile. The group, which operates notable chains including Slug & Lettuce and Be At One and is owned by private equity firm TDR Capital, is reportedly hoping to raise around £800 million through the sale.
The sale comes as pressures mount on operators in the UK hospitality industry, including rising costs for staff, energy and raw materials, dampening consumer sentiment as the cost-of-living crisis continues and the ongoing impact of COVID-19. It is anticipated that these headwinds will see an escalation in hospitality firms seeking to divest assets this year, with Stonegate rival JD Wetherspoons having recently put a portfolio of pubs up for sale in an effort to cut costs.
Bar group Revolution has also recently announced that it will close some of its sites on Mondays and Tuesdays as it looks to reduce its energy costs. There have been warnings that conditions could yet worsen in the sector, with the government set to scale back its energy support package for businesses from April.
In a recent interview, Stonegate chairman Ian Payne said: “The biggest concern is energy. We know what we’re going to pay in February and March. But we still don’t know what we’re going to pay beyond that.”
Stonegate’s portfolio of UK pubs stands at around 4,500 sites, following its £1.27 billion acquisition of rival Ei Group, which completed shortly prior to the onset of the COVID-19 pandemic. The group subsequently saw its trading impacted by pandemic-related restrictions, registering a £746 million loss in the year to September 2020 and a £233 million loss the following year.
At the time of its acquisition of Ei, around a quarter of Stonegate’s pubs were in its managed division, with the majority leased and tenanted businesses. According to reports, the group had been looking at options to convert many of its leased and tenanted sites to managed pubs.
Stonegate has not announced which sites will be included in the sale process, but it is understood to be part of a longer-term group strategy and is not expected to occur imminently.
Find out how the headwinds facing UK hospitality businesses could spur M&A activity.
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