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.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.