Thu 18th Jul 2019 - Stonegate to absorb Ei Group into existing business following £3bn takeover, Simon Townsend to step down Stonegate to absorb Ei Group into existing business following £3bn takeover, Simon Townsend to step down: Stonegate Pub Company will absorb Ei Group into its existing business rather than running it as a standalone if its £3bn takeover bid is approved. Stonegate has struck a deal to buy circa 4,000-strong Ei Group for 285p a share. The new-look business will be led by Stonegate chief executive Simon Longbottom with his Ei Group counterpart Simon Townsend and its entire board stepping down. Until now, Stonegate has been an entirely managed company, with 765 sites. As well as Ei Group’s 357 managed pubs and 61 managed investment sites, which it aims to grow to between 460 and 470 combined by the end of the financial year, Stonegate will create new divisions to incorporate Ei Group’s 3,555 leased and tenanted sites and its commercial properties business. Stonegate has committed to investing in both these elements. Longbottom told Propel that Ei Group was a company it had admired for “some time”. He said: “It changed its strategy in 2015 and we’ve watched its progress with interest since, especially the success it has had with its managed estate, which it has been growing steadily and developing, including through the joint-venture model. We are darn good at buying businesses and investing in them and this is an exciting opportunity for us, both in terms of the 4,000 sites and the people being brought into the business. Stonegate will have three divisions and the business will be led by me and (chairman) Ian (Payne). While we are a managed operator currently, we know the leased and tenanted business very well through my time at Greene King and Ian’s at Laurel. We look forward to meeting these licensees in due course.” The acquisition, which is due to complete in the first quarter of next year, will be looked at by the Competition and Markets Authority. However, Longbottom said he was confident the deal would be approved. Stonegate has agreed to dispose of up to 100 sites and believes this would be enough to secure clearance. Longbottom said it was too early to decide how the set-up would affect Ei Group’s headquarters in Solihull and its own base in Luton, but added it would be “business as usual” during the next seven to eight months while the acquisition completes. In terms of potential further acquisitions, Longbottom said: “Our priority will be on integrating 4,000 pubs and getting to know the Ei Group business better – but never say never.” Townsend told Propel: “I am so proud of what this business and the teams in it have achieved in executing a complex, not without risk, strategy to get us to the point where we have a price that values the group, the people and pubs on a significant premium. Being a wholly managed operator, Stonegate has better expertise in that field than we have to grow that business. Saying that, it was important to us we got the commitment Stonegate has given to protect and invest in the tenanted and commercial properties businesses. While this is a bitter-sweet moment for me in that I will be leaving, there is still plenty of work to be done before the acquisition completes next year. Therefore, I’m concentrating on us continuing to grow our like-for-like sales and Ebitda, which in the first half of the year grew for the first time in a decade. I can only think about what comes next when the deal completes.” Propel insights editor Mark Wingett will look at the proposed acquisition in his latest piece, which will be sent to Premium subscribers on Friday (19 July) at 5pm.