Marston’s PLC has today announced that it has agreed to acquire the Charles Wells brewing business from the Charles Wells Group for a cash consideration of £55m, plus working capital adjustments.
Based in Bedford, Charles Wells Brewing and Beer Business is an established high quality brewing business with a portfolio of more than 30 beers including leading brands such as Bombardier, Young’s and McEwan’s.
In addition, the business has UK distribution rights for the Estrella Damm lager brand and other beers under license including Kirin and Erdinger. As part of this acquisition, we have entered into a long-term exclusive agreement to supply all beer, wine, spirits and minerals to the Charles Wells pub estate. The brewery site, which is freehold, employs around 300 people.
The Charles Wells Brewing and Beer Business acquisition complements the existing
Marston’s Beer Company strategy:
• Extends our number 1 position in the premium bottled ale and cask ale markets, and enhances our share of the premium canned market.
• Strengthens our presence in London and the South East and presents a platform to expand into Scotland.
• Develops our licensed brands business.
• Expands our production capabilities to include lager brewing and canning, whilst improving production and distribution efficiency.
Furthermore, there is a strong financial rationale for the Charles Wells Brewing and Beer Business acquisition:
• Enterprise value of £55m equates to 9x current EBITDA before synergies.
• Transaction to be funded through equity placing as announced today
• Expected synergies of £4m to be achieved by financial year 2019.
• ROIC expected to exceed 18% in third full year.
Rationale for the Charles Wells acquisition
Marston’s Beer Company (MBC) has deployed a consistent strategy over the last five years to become the UK’s leading premium beer business.
Today, MBC has an experienced senior team and holds leading market share in both the premium bottled and premium cask ale markets. MBC takes a local approach to its brewing capabilities via its portfolio of five regional breweries located throughout England and has recently extended its focus to licensed brands, including Shipyard, which is now the number 2 Craft Beer in the UK, as well as the Warsteiner, Kruzovice and Kingstone Press brands.
MBC has also successfully enhanced shareholder value through acquisitions, most recently through the £25m purchase of the Thwaites beer business in 2015. Since acquisition the Thwaites beer brands have performed strongly, delivering synergies in line with expectations and returns well in excess of the Group average.
Charles Wells Brewing and Beer Business presents an excellent opportunity which is consistent with our strategy. With a brand portfolio which will not only increase our ale market share from 11% to 16%, this acquisition will also strengthen our representation in London and the South East, and present an opportunity through the McEwan’s brand to expand into Scotland.
Charles Wells Brewing and Beer Business also brings with it significant expertise in licensed brands most notably its portfolio includes the growing Estrella Damm lager brand which represents a significant opportunity. From a supply chain perspective, Charles Wells offers lager brewing and canning capacity of scale, activities which are not currently undertaken by Marston’s. In addition, the acquisition presents opportunities to further improve efficiencies in brewing, packaging and logistics.
Charles Wells Brewing and Beer Business financial profile
For the financial year ended 30 September 2016, Charles Wells Brewing and Beer Business generated revenues of £92m, EBITDA of £6m, operating EBIT of £5m on a 52 week basis and net tangible assets of £36m. Marston’s estimates it can generate operational improvements similar to those achieved in previous acquisitions and has identified potential costs savings of £4m by financial year 2019, with the majority being realised in financial year 2018.
Completion of the acquisition is expected in June 2017, following completion of the appropriate consultation procedures.
Ralph Findlay, Chief Executive Officer of Marston’s PLC, (pictured) commented, “We are delighted to have agreed to acquire Charles Wells Brewing and Beer Business. It is a high quality brewing business offering us opportunities to extend our trading area in the South of England and Scotland, and brings a range of well-known and popular brands into our portfolio. We also aim to develop further our range of international licensed brands, and look forward to working with our new overseas partners, including Estrella Damm, Erdinger and Kirin.
'The acquisition of Charles Wells Brewing and Beer Business builds on Marston’s established brewing prowess and is a further step in our objective to develop the leading premium beer business in the UK market. We have demonstrated our ability to acquire, integrate and develop beer brands evidenced by the success of brands such as Hobgoblin, Wainwright, and Lancaster Bomber. We have also achieved success with international licensed brands including Shipyard, now the 2nd biggest craft beer in the UK on trade.”
Justin Phillimore, Chief Executive Officer of Charles Wells Brewery Limited, commented, “We are delighted to have reached an agreement with Marston’s to acquire our brewery and become a close trading partner. After a detailed review of our strategy we had decided to re-balance the company more towards retail investment and that meant finding a partner we could work with for the future. There are opportunities for both companies in this deal and we look forward to bringing them to life.”