Greene King pub giant snapped up by Hong Kong firm CKA

Greene King said CKA shared many of its business philosophies

Pub giant and brewer Greene King has agreed to be bought by Hong Kong operator CKA, the latest deal in a wave of consolidation in the sector.

Suffolk-based Greene King owns roughly 2,700 pubs, restaurants and hotels in total across the UK.

The deal values Greene King at £2.7bn.

The move comes just months after Fuller's, the brewer whose beers include London Pride, sold its entire drinks business to Japan's biggest brewer Asahi.

And last month, pub group Stonegate Pub, which owns the Slug and Lettuce chain, announced it was buying rival Ei Group - once known as Enterprise Inns - for £1.3bn.

Greene King chief executive Nick Mackenzie said CKA shared "many of Greene King's business philosophies".

"They understand the strengths of our business and we welcome their commitment to working with the existing management team, evolving the strategy and investing in the business to ensure its continued long-term growth," he added.

Greene King's directors said the terms of the deal were "fair and reasonable" and that they would unanimously recommend it to shareholders who will get the final vote on the tie-up.

Shares in Greene King surged more than 50% after the deal was announced.

Bad for customers?

Neil Wilson, analyst at Markets.com, said while the deal was good news for shareholders, it was likely to be bad news for Greene King's customers.

"I think we can comfortably expect more pub closures. It's a whopping [price] that implies CKA sees significant value in the property portfolio," he said.

In its statement, Greene King said CKA had no plans to make "material changes" to group and management staff numbers and did not intend to "initiate any material headcount reductions within the Greene King organisation as a result of the acquisition."

A combination of rising cost pressures and people spending less on going out has led to a wave of pub closures. Last year nearly 1,000 UK pubs shut, according to property firm Altus Group.

Industry group the Campaign for Real Ale (Camra) has said more people are drinking at home to save money, while younger people are consuming less alcohol in general.

Meanwhile, pubs have faced a "triple whammy" of taxes in the form of high Beer Duty, VAT and business rates.

Mr Wilson said the properties that pubs owned was making the sector attractive to investors.

"Greene King owns the freehold or long leasehold on 81% of its properties. The company recently carried out a revaluation of its property estate that indicated a market value of £4.5bn against the £3.5bn book value," he said.

CKA was founded by Hong Kong's richest man Li Ka-Shing, whose business empire spans retail, telecoms and power firms.

Mr Li retired from leading the firm last year. He was ranked 28th in this year's Forbes rich list.

He started work sweeping factory floors as a young boy, but subsequently became one of the first Hong Kong tycoons to invest in mainland China, with property playing a big part in his wealth.