Marston's takes on 156 Brains pubs

Marston’s has exchanged contracts with Brains to operate its portfolio of 156 pubs in Wales through a combination of leased and managed arrangements.

The deal materialised as a consequence of Covid-19, with Brains’ business under significant financial pressure. In order to address its immediate funding requirements, Marston’s entered into collaborative discussions with the company with a view to preserving the freehold capital value for its stakeholders and safeguarding the jobs of the pub teams within the business.

The Brains pub business comprises a freehold estate of 86 managed and 55 tenanted pubs, together with a leasehold estate of 15 managed pubs and bars. The pub business currently employs around 1,300 people.

Marston’s will operate the 141 freehold pubs on a leasehold basis with effect from February 2021, with rent chargeable from April 2021. The majority of these will be on long lease agreements of 25 years. The outlet level EBITDA on a pre-Covid basis is £14m and annual rent of £5.5m will be charged from April 2021. In addition, Marston’s will operate the 15 short-leasehold sites on a management contract basis for a period of two years.

The c1,300 people currently employed in the pub business will transfer across to Marston’s and an initial incremental central overhead of up to £2m will be required to operate the additional pubs.

Pub & Bar understands that Marston’s sees opportunities to further grow earnings in the medium term through conversion to franchise and additional investment opportunities in the estate. The transaction does not impact Marston’s financial strategy to reduce borrowings to below £1bn by financial year 2024.

It is anticipated that the transaction will complete in February 2021 and a more detailed presentation of the transaction will be set out on the completion date.