viewGreene King

UPDATE - Greene King in good spirits ahead of merger


--adds broker comment, updates share price--

Greene King (LON:GKN) toasted “encouraging” sales over Christmas and the New Year as the British pub group prepares to merge with its rival, Spirit.

Across its 1,900 UK pubs, restaurants and hotels, Greene King posted a 2% rise in sales for the two weeks covering Christmas and Hogmanay.

Poorer weather and tougher drink-driving laws in Scotland hampered performance, it added, but the business achieved record retail sales of £3.4mln on Christmas Day.

Meanwhile, like-for-like sales for the 36 weeks to 11 January grew 0.6%, the firm said, with total sales up 5.9% compared to the same period last year.

The group is about to merge with rival Spirit Pub Company (LON:SPRT) after 99% of its shareholders agreed to the £774mln acquisition.

“The exact timing of the completion of the deal remains uncertain but we expect the deal to complete by the end of the first half of 2015,” said Greene King chief executive, Rooney Anand.

The deal creates a combined group with over 3,000 outlets and was agreed last November following Spirit's rejection of an earlier approach from Magners cider maker C&C Group.

Analysts at Canaccord Genuity said the deal is more than purely defensive.

“We believe the combined entity will be a much stronger investment proposition with higher quality earnings, stronger FCF [free cash flow] and better growth prospects.

“This goal is where investors need to remain focused.”

The broker upped its share price target for Greene King to 880p.

Shares are currently trading around 787p.

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