Li Ka-Shing’s property investment firm, CK Asset Holdings Ltd., has agreed to buy the pub operator and brewer Greene King Plc for £4.6 billion. It is paying £2.7 billion for the company, while taking on its £1.9 billion worth of debt. This is following concerning performance over the last year for Greene King, with full-year pre-tax profit down 12.5%. CK’s strategy for Greene King is currently unclear, but they have explicitly stated that they have no intention to cut any of the 38,000 staff.
Impact on Businesses and Law firms
As news of this transaction was released, the shares of rivals like JD Wetherspoon and Mitchells & Butlers were lifted. This is due to the potential of CK attempting to shut some of its pubs and breweries in an attempt to cut costs, opening up market share to these other competitors.
This deal is in the wider context of foreign buyers purchasing British brewers, with Fuller, Smith & Turner being bought by Asahi and Camden Town Brewery becoming a wholly owned subsidiary of AB InBev (the world’s largest brewer). There seems to be confidence in the long-term prospects of traditional British breweries, as well as a seizing of opportunities given the current low pound.
Interestingly, Li Ka-Shing recently weighed in, slightly ambiguously, on the Hong Kong protests. It could potentially be claimed that Ka-Shing’s calls to stop violence are economically motivated by the benefits restored peace could bring to his transaction. Likewise, a stop to the unrest will further stabilize his property firm. Indeed, Ka-Shing has suffered paper losses of $3 billion as Hong Kong’s political turbulence undermines the value of his assets.
M&A lawyers will have helped on this transaction, generally helping draw up contracts while pooling support from other departments like tax, real estate and employment. It is likely restructuring lawyers may be needed if CK decides on implementing any significant changes to Greene King.
By Lewis James