Spirit dominates Greene King's first-half thinking

Mergers and acquisitions, coupled with regulatory rule changes, has ensured Greene King has had a lot on its plate in its first-half figures.

Man works in pub
Source: Bloomberg

Having stood the test of time over the last 400 years, the UK pub tie system has been shaken up by the House of Commons. With such sweeping changes to the status quo it is unsurprising that brewers have forecast aggressive job cuts in the industry as a result. Greene King has as yet failed to quantify this but has voiced its worries over the ‘hugely negative impact’ this would have. With up to 1,400 establishments closing and possibly 7,000 jobs due to be lost, it would be unlikely to remain immune from this.

Greene King has also tabled an offer to acquire Spirit for £774 million. At the moment this deal has not been completed and there is still a chance that C&C could gazump Greene King but would probably need to table an improved all-cash offer. Greene King’s management believes that, combined with Spirit, the new company would be able to find synergies that could be as much as £30 million on an annual basis.

The drinks sector has not performed well in the markets and over the course of 2014 Greene King shares have dropped from highs in January of £9.35, down to the current £767 region. This drop of almost 18% has taken the share price back down to the June 2013 levels. The 50-day moving average looks likely to form short-term resistance while the 100-day moving average is not too far behind.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.