Scottish bind

6 October 2003 By Rob Cox Follow @rob1cox

The sale exceeded expectations, creates a focused European brewer from a pubs conglomerate and underlines demand for UK pubs. But S&N already spent most of the proceeds. It will still be highly geared with a middling growth profile not too attractive for a bid.

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Scottish & Newcastle agreed to sell its pubs business for $2.51bn to Spirit Amber Bidco, a new company formed by a consortium led by Texas Pacific Group and The Blackstone Group and also comprising CVC Capital Partners and Merrill Lynch Global Private Equity.

At the same time, Spirit Group Holdings, a rival pub group, will move into Spirit Amber Holdings. S&N will receive £2.43 from the sale after netting out pension provisions for the retail business.

S&N also reached a 7year agreement to supply its brands of beer and cider, at market prices, to the bidding group. The agreement contains a volume commitment that subject to a market change mechanism is in line with current volumes supplied to the existing S&N Retail Estate.

The successful sale of S&N Retail is a key step in the Group's strategy of focusing on its brewing business, said Tony Froggatt, Chief Executive of S&N. The proceeds from the sale will be used to reduce debt, strengthening the financial position of Scottish & Newcastle. This will enable us to develop and drive value from our existing European platform, whilst continuing to build on our established positions in other markets where S&N has high potential for organic growth such as Russia, the Ukraine, India and the United States.

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