Heineken buys struggling pub company
In May 2009 already, Heineken had felt compelled to snap up a big chunk of the Globe’s debt – Heineken bought back Globe’s shares at a face value of GBP 130 million, albeit at a discount – to become the group’s controlling creditor as this move freed the brewer from the onerous beer supply agreement it has with the Globe.
Although the Globe is owned by Mr Tchenguiz, Heineken has a 30-year contract to manage and supply beer to its estate through its Scottish & Newcastle subsidiary, which Heineken bought last year together with Carlsberg.
However, under the terms of the highly unusual agreement, if the Globe hits financial difficulties, payments due to bondholders and lenders will have priority over payments to S&N, even though Heineken would still be contractually obliged to continue supplying beer and managing the estate. This was revealed by the UK’s media.
Hence, Heineken has found itself stuck in a highly unusual situation – managing and supplying beer to Globe without receiving any payment – since Globe breached its banking covenants and then slipped into default this year.
While Mr Tchenguiz will have a controlling stake of just over 50 percent in the new EPB Pub Company through one of his investment vehicles, Heineken, which is providing GBP 180 million to finance the deal, is expecting to acquire full ownership of the estate in the third quarter next year under a “conditional share purchase agreement” with Mr Tchenguiz.
The terms for this part of the deal were not disclosed. However, it is understood that Heineken will be acquiring the stake for a nominal amount.
Proceeds from the asset sale will be used to repay the Globe’s debts.
Mr Tchenguiz paid GBP 345 million to buy 360 pubs from Spirit in December 2004 to form Globe but the company ran into trouble this year after it defaulted on a GBP 257 million loan.
Like other tenanted pub operators, the Globe’s estate has been hard hit by the smoking ban in pubs, the recession, soaring beer duty and cheap drinks in supermarkets.
