Mitchells & Butlers buys Orchid venues for £266m

By Gemma McKenna

Published: 16 June, 2014

Mitchells & Butlers has boosted its 1,600 strong estate with the addition of 173 of Orchid Group's venues after completing a deal worth £266 million.

The group is forecasting double-digit earnings enhancement, with returns well ahead of the capital outlay, following the purchase.

Mitchells & Butlers All Bar One, part of the expanding M&B estateM&B has spent £266m on the purchase of 173 Orchid pubs, in line with its expansion plans.

Around 96 of those will be converted to M&B-owned brands and formats within the next two years, while the company expects to make savings of £6 million per year by rationalising back office functions.

Of the 173 outlets purchased, 158 are pubs held on a freehold or long leasehold basis.

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."

M&B chief executive Alistair Darby said the acquisition will 'accelerate' the group's growth.

Mitchells & Butlers' share of the UK branded pubs and restaurants market is expected to grow by 6% per annum between 2014 and 2018.

The firm is planning to spend £35 million over the next two years to convert the pubs to its own brands, including Harvester, Toby Carvery, Ember, Miller & Carter, Castle and Vintage Inns. It claims that M&B's own branded pubs take in sales of £22,700 per week, compared to £15,300 for the acquired assets.

Seventy seven of the acquired pubs, mainly those who have just benefited from investment, will join the group's Heartland portfolio, while a small number may be considered for disposal.

M&B is the UK's largest operator of managed restaurants and pubs, with brands and formats includes All Bar One, Browns, Harvester, Toby Carvery, Country Pubs, Sizzling Pubs, Crown Carveries, Oak Tree Pubs, Miller & Carter, Castle, Alex, Nicholson's, O'Neill's and Ember Inns. It serves around 130 million meals and 410 million drinks each year.