Bloomberg News
LONDON Deutsche Bank AGs Morgan Grenfell private equity unit has agreed to buy 3,000 pubs in Britain from Whitbread PLC for $2.3 billion of cash.
The deal would make Morgan Grenfell the nations fourth-largest bar landlord.
Morgan Grenfell is to buy 1,288 directly managed outlets and 1,700 sites leased to independent operators. Whitbread, which sold its breweries last year, is focusing on the United Kingdoms faster-growing hotel and restaurant chains, such as Travel Inn and Pizza Hut.
The takeover adds Morgan Grenfell to a growing number of private equity groups buying British pubs. Almost 18% of the countrys 60,000 bars are now controlled by Morgan Grenfell, Nomura Securities Co., or Westdeutsche Landesbank Girozentrale, or WestLB, one of Germanys largest banks.
Venture capitalists are buying pubs because they provide strong, reliable cash flow, said Mark Reed, an analyst at the London brokerage firm Teather & Greenwood, which has a hold rating on Whitbreads stock. They can securitize the earnings and get a reasonable return without investing too heavily.
Morgan Grenfell, which has $2.4 billion of assets under management, plans to sell bonds using the properties as collateral, said Jeremy Ghose, a joint general manager at FujiBank, which together with Lehman Brothers is helping arrange financing for the purchase.
Pubs are a good asset in volatile times like these because they have a predictable cash flow, making them easier to securitize, Mr. Ghose said. Whitbreads 3,000 outlets generated sales of $144 billion in the six months ended Sept. 2, the company said.
