Marston’s has announced plans to join its brewing arm with Carlsberg’s UK arm to form a joint venture worth around £780 million.
Wolverhampton-based Marston's will concentrate on its pubs, restaurants and hotels operations and have a 40 per cent stake in the new Carlsberg Marston’s Brewing Company.
The move, which is the latest in a string of deals involving UK brewers, has valued Marston’s brewing business at £580 million, with Carlsberg’s UK brewing division valued at £200 million.
Marston's brewing business includes Banks's, Hobgoblin and Marston's Pedigree.
The companies said talks over the move started towards the end of 2019 and hope to seal the deal in the third quarter of 2020.
It is not yet known what implications the move will have for Marston's staff, many of whom have been furloughed since the coronavirus lockdown began.
'Global and local brands'
Ralph Findlay, chief executive of Marston’s, said: “I am delighted to announce today’s joint venture with Carlsberg UK.
“This new partnership acknowledges Marston’s strategy, position and consistent outperformance against the UK beer market, realising value for shareholders today, whilst retaining an interest in the future upside of the combined entity.
“Marston’s strong heritage, extensive distribution platform and established reputation for brewing and logistics excellence, together with Carlsberg UK’s values, long history in beer, brand portfolio and scale, combine the best attributes of both to create a compelling beer business with an outstanding portfolio of global and local beer brands, proven brewing expertise, strong distribution network and wholesale opportunity.
"Marston’s will play a key role in the prospects of the combined entity which represents an exciting new chapter in Marston’s established brewing heritage and future potential, whilst enabling it to further reduce its debt and focus on maximising value from its high quality pub estate."
The partnership is intended to create a best in class, brand-led UK brewer and distribution company with increased scale and resources
Marston's is receiving a cash equalisation payment of up to £273m as part of the deal which will materially reduce the group's debts and provide additional financial flexibility.
Tomasz Blawat, managing director of Carlsberg UK, said: “We are excited to move into the next phase of our growth strategy.
“Our intent for the Carlsberg Marston’s Brewing Company is for it to become a platform for growth for all of our customers and suppliers, offering a bigger beer portfolio of complementary international, national and regional brands.
“We believe the new business will deliver even more value for employees, customers and consumers, thereby creating greater future growth potential.”
What now for Marston's?
Parts of Marston's have been brewing in the Midlands for nearly 200 years and Banks's beers are still brewed at the 145-year-old Park Brewery in Chapel Ash, Wolverhampton.
The company, which employs about 14,000 and has an estate of around 1,350 pubs nationally, was Wolverhampton and Dudley Breweries before changing its name with the acquisition of Burton upon Trent-based Marston's in 1999.
Marston’s has been highly successful in growing its brewing business both organically and through acquisitions of rival breweries in recent years.
This has been against a backdrop of ongoing challenging structural changes in the beer market and the Marston's board has been carefully considering options to maximise growth.
The directors had considered various options which would allow it to realise both its strategic ambitions and the inherent value of its leading brewing business and discussions with Carlsberg UK, a division of the Danish Carlsberg Group, began in late 2019.
The deal allows Marston’s to retain an active and substantial investment in the new brewing joint venture whilst refocusing with greater emphasis on its pub and rooms business and its board believes that the joint venture will create one of the UK’s leading brewing, beverage and distribution businesses.
A combination of the Marston’s and Carlsberg UK brewing business and their leading beer brands creates an exciting new business.
The portfolio will include Bank's Original, Carlsberg Danish Pilsner, Marston’s Pedigree, Hobgoblin, Poretti, Wainwright, Young’s and a wide range of world beers and regional ales.
They will benefit from Marston’s and Carlsberg UK’s combined brewing, marketing and distribution platforms.
Marston’s, which operates six breweries, is one of the UK’s leading brewers of premium cask and packaged ales, as well as having the UK distribution rights for a range of licensed brands in the world beer, craft beer, low and no alcohol beer and cider market segments.
A long-term supply and distribution agreement will be put in place as part of the deal and the Carlsberg Marston’s Brewing Company will exclusively supply and distribute drinks and related services to Marston’s retained pub business on a third party arm’s length basis.
Marston is continuing with its strategy outlined in January 2019 of reducing debt, delivering sustainable growth and maximising return on capital for shareholders.
An important focus of the joint venture will also be the enhancement of the Carlsberg brand within the UK beer category.
Marston’s and Carlsberg UK have both made significant investments in improving their brewing efficiencies over recent years. Carlsberg UK has invested £30 million in production over the last three years whilst Marston’s invested in a new canning line in Burton in 2018 opening up more sales opportunities in addition to bottling.
Marston’s will have two and Carlsberg UK three representatives on the board of directors of the joint venture. Ralph Findlay, chief executive of Marston’s will serve as non- executive chairmann and Tomasz Blawat, current managing director of Carlsberg UK, will be the chief executive.
Richard Westwood, the current MD of Marston’s Brewing Business, will be appointed chief operating officer – integration.
Business plans will be agreed between Marston’s and Carlsberg UK on a five-yearly basis. The business plan for the initial five years from completion has already been agreed.
Tomasz Blawat, managing director of Carlsberg UK, said that the “strong heritage” of both firms made the venture logical.
He said: “I believe in having a strong balance of international brands and local brands. The deal complements this perfectly.
“I wish this was all happening in a different set of circumstances but things have substantially changed since we first had conversations last year.
“We were well into discussions when the coronavirus crisis kicked in and we were left facing the choice of whether to continue, but we have a very long-term view.”