C&C shares surge on ‘transformational’ deal

By Geoff Percival

Shares in Irish drinks group C&C surged by almost 9% after the cider and lager maker completed the acquisition of Matthew Clark Bibendum (MCB), the largest independent distributor to the UK pub trade.

The move significantly strengthens C&C’s hand in the UK market. The group —chiefly known for its twin Bulmers/Magners cider brands, and Tennent’s lager — last year bought a 47% stake in pub group Admiral Taverns and extended its distribution deal with brewing giant AB InBev to improve its route-to-market in Britain.

AB InBev is providing an element of financial support for the latest purchase, but C&C is largely funding the investment from its own facilities.

C&C is buying MCB out of administration for a nominal sum and will provide sufficient funds to support its working capital and other cash requirements. The English business will have £102m (€116m) of working capital facilities provided by its current lending group, which will be repayable over the next 12 months.

Listed UK wholesale group Conviviality announced its intention to appoint administrators to Matthew Clark Bibendum and explore a potential sale of the business late last month.

C&C said the acquisition will complement its existing wholesaling businesses in Ireland and the UK and create the leading independent route-to-market network across both countries.

The Irish group also said it expects the deal to provide direct access to around 23,000 ontrade customers, to boost exposure of its cider and super-premium brands and give it enhanced access to the premium trade sectors in London and the south-east of England.

It also expects “significant earnings accretion” and “attractive returns on capital” in the first full financial year of ownership.

Davy called the acquisition “transformational” for C&C’s UK operations.

“Following the acquisitions of Wallace’s and Gleeson and investment in Admiral, MCB marks a material upscaling of C&C’s downstream activities across core markets,” it said.

The purchase also marks a rare bit of positive newsflow for C&C of late, with the group having — in the past two months — pulled the plug on an American distribution deal, effectively putting paid to any chance of selling its underperforming US cider business; and warning of a 9.5% drop in operating profit for its recently completed financial year. C&C is due to formally publish its earnings, for the 12 months to the end of February, next month.

C&C’s share price was up by nearly 11% at one point yesterday before marginally paring back later in the day.