Friday (25 January) morning saw the surprise announcement that Japanese beer giant Asahi [TYO;2502] had further cemented its position in Europe with the proposed acquisition of London-based Fuller, Smith & Turner’s [LON:FSTA] beer portfolio for GBP 250m, at a punchy 23.6x EBITDA multiple.

Fuller’s will retain its pub and leisure portfolio and while investors welcomed the deal, with the London listed operator’s shares closing up 15.5%, it could perhaps raise eyebrows that Fuller’s did not hold out for more.

As part of the deal, Asahi has purchased Fuller’s iconic Thames-side Griffin Brewery site in leafy Chiswick. In 2006, then family-owned West London peer Young’s sold its Ram Brewery site in Wandsworth for GBP 69m. By 2014, China’s Greenland Holdings Group bought the Ram Brewery site, complete with planning permission for 661 homes, in a deal valuing the land at GBP 600m.

Additionally, recent UK buyouts in the quality beer space have come at eyewatering multiples.

AB InBev’s [EBR:ABI] GBP 85m 2015 takeover of Camden Town Brewery closed at an astounding 217x EBIT; this news service reported that Heineken’s [AMS:HEIA] purchase of a 49% position in London upstart Beavertown valued the group likely above GBP 200m, which would have been north of 150x EBIT.

However, Camden and Beavertown are both noted for their fashionable craft beer credentials and visually arresting can designs. By contrast, Fuller’s is a venerable institution, dating back to 1845 and remaining family controlled. Its beer business, though respected by aficionados, is certainly mature.

We’ve highlighted credible UK craft players on the watchlist before – the likes of Five Points, Thornbridge, Northern Monk, Magic Rock, Cloudwater and Hop Stuff.

But the greater read across from Fuller’s might be to its direct peers – those historic regional breweries with London listings and major pub portfolios.

Selected UK Brewery and Pubco Deals (2015-2018) 

Those of us at Dealspeak old enough to have experienced the heady pre-Lehman days well remember the machinations at Greene King [LON:GNK] while it mulled over 2007-2009 whether to spin its pub portfolio into a real estate investment trust (REIT). The Bury St Edmunds-based company currently owns 3,100 pubs.

Fuller’s plan to operate as a “focused, premium pub and hotel” player might focus the minds of investors and executives alike at Greene King, whose shares rose 2.82% today. Greene King stock closed at GBP 6.02 versus a five year high of GBP 9.78 in 2015.

Marston’s PLC [LON:MARS] has been notably acquisitive, in 2017 swallowing the Charles Wells brewing business. It also has a significant pub portfolio of more than 1,500. It has to be said, Marston’s hoovering of beer brands over the past 15 years suggests a commitment to the combined brewer-pub operator model. Though Fuller’s itself bought Sussex-based Dark Star Brewing in February 2018 and barely a year later is out of the game.

In Kent, smaller NEX-listed beer producer and pubco Shepherd Neame [NEX:SHEP] has a considerable platform as a contract brewer in the UK, churning out Boston Beer Company’s [NYSE:SAM] famous Samuel Adams Boston Lager for British drinkers. With just 300 pubs, its footprint may well be small enough for the consolidated model to shine.

That may not stop advisors heading to Faversham for the sea air – with maybe a pitch and not a pitcher in mind.

by John West in London, with analytics by Jonathan Klonowski

John West Managing Editor EMEA Acuris