M&A activity boosts Greene King shares

Greene King looks set to complete its acquisition of Spirit Pub company before the end of the month. 

A man pouring beer
Source: Bloomberg

On Wednesday 1 July Greene King is due to post its full-year figures. Expectations are that the adjusted earning per shares will drop fractionally from £0.614 down to £0.61 while sales will have increased from £1.302 billion up to £1.328 billion. The big change, however, will be the anticipated 58% jump in pre-tax profits from £105.2 million up to £166.5 million.

Institutional support for Greene King has remained strong and the ongoing developments around its M&A activity will have only strengthened this perception. At the moment eight firms have the brewery firm as a buy, six as a hold and only one as a sell. The average 12-month price target for the company is 841.27p, only offering a 1.35% premium to the current 830p price.

Market watchers have been pre-occupied with Greene King’s takeover of Spirit Pub for almost £775 million, which has required an investigation from the Competition and Markets Authority. This deal looks set to be completed in days rather than weeks but will happen too late to be included in this set of results. Once this is completed there will no doubt be a period of consolidation between the two, where the synergies can be fully assessed, and this will probably see a number of outlets being shut down and sold off.

The shares have fallen away from their mid-March highs and have been channel bound in a lateral move for some time. As the shares continue to sit in the mid-range of the RSI and oscillate around the 50-day moving average, it is difficult to get too enthusiastic about a clear move materialising without further commentary the markets are as yet unaware of.

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