M&B buys the bulk of southern rival’s estate for £266m

PUBCO Mitchells and Butlers has acquired the majority of the activities of the Orchid Group including 173 pubs and its head office for £266m.

It was revealed at the end of May that Birmingham-based M&B was in advanced talks to do a deal with St Albans-based Orchid.

Of the 173 pubs that M&B has bought, 158 are freehold or long leasehold.
 
M&B said the deal expands its share of the growing UK branded pubs and restaurants market in line with its stated strategy.

Orchid Group was established in 2006 and operates pubs, bars and restaurants around the UK under brands such as Great British Carvery, Do Drop Inns and Fuzzy Ed’s.

It has been owned by the real estate arm of Deutsche Bank since 2012 following a restructure which saw the exit of previous owner, private equity firm GI Partners.

M&B said there is an opportunity for substantial sales and profit uplifts from conversion of 96 pubs to Mitchells & Butlers brands and formats over a two year period.
 
It also points to potential cost savings and synergies of at least £6m a year from rationalisation of support functions and combined purchasing.
 
M&B suggests the deal will be mmediately enhancing to adjusted earnings with further improvements to earnings and returns as cost savings and synergies are realised and as conversions are undertaken.

Overall, it expects double digit earnings enhancement with returns well ahead of cost of capital.
 
Alistair Darby, chief executive of Mitchells & Butlers, said: “The acquisition of the majority of the Orchid estate will accelerate Mitchells & Butlers’ growth and present significant opportunities for value creation through cost savings, synergies and the conversion of Orchid pubs to Mitchells & Butlers brands.

“We greatly look forward to welcoming the Orchid employees who will transfer to Mitchells & Butlers as a consequence of this acquisition.”
 
Jewellery Quarter-based M&B runs chains such as Harvester, All Bar One and O’Neill’s.