Weak pound: Hong Kong’s richest family buys Greene King for USD 5.6 billion

United Kingdom | The listed brewer and pub operator, Greene King, with a portfolio of 2,700 pubs, restaurants and hotels, has been snapped up by CK Asset Holdings from Hong Kong in a GBP 4.6 billion (USD 5.6 billion) transaction. The deal is still pending shareholder and regulatory approval.

The news broke on 19 August 2019 that CK Asset Holdings will pay GBP 2.7 billion for Greene King’s share capital and will take on its GBP 1.9 billion debt.

The cash consideration presents an enterprise value of 9.5 times Greene King’s profit (EBITDA), which was GBP 482 million (USD 584 million) in the 12 months to 28 April 2019.

Greene King employs 38,000 people in England, Scotland and Wales.

According to the Financial Times newspaper, CK Asset Holdings is a property investment firm, which was founded by Li Ka-shing, 91, and is run by his son Victor. It is based in Hong Kong, but incorporated in the Cayman Islands. The Li family and trust control around a third of the company, which owns a sprawling portfolio of assets, covering hotels, utility infrastructure and aircraft leasing.

The senior Mr Li, who is reportedly Hong Kong’s richest man, has racked up paper losses of around USD 3 billion since the end of July, as the unrest in his home city has hit the value of his holdings.

The Financial Times says that the investment group is undaunted by the economic prospects for the UK after Brexit. Reportedly, it is taking a long-term view of British consumer spending. Insiders argue that the fall in the value of the pound in recent weeks has encouraged foreign investors to snap up UK assets as they are getting cheaper by the day.

Greene King was founded in 1799 and has a brewing arm with brands like Old Speckled Hen, Abbot Ale, and Greene King IPA. Like other pub groups, it has been grappling with shifting consumer trends. Younger people are drinking less than previous generations, while pubs have also faced competition from cheap supermarket drinks, media say.

The Guardian newspaper worries that CK Asset Holdings is only after Greene King’s property portfolio, and pub closures will follow. “Many of these properties are in desirable parts of the country and would be worth more if converted into homes than they would be if they stayed as pubs,” the Guardian says.

The sale to CK Asset Holdings comes seven months after Greene King’s rival, Fuller’s, sold its brewing arm to Japan’s brewer Asahi for approximately USD 300 million.

CAMRA’s Chairman Nik Antona said the sale was “concerning” for Britain’s beer scene. He added: “Greene King has been in operation for over 200 years and it is a very sad day to see such a well-known and historic name exit the business.”