Martson’s will take over the running of around 150 pubs in Wales from Brains in a deal saving up to 1,300 jobs.
The deal will see the leading UK pub chain taking on the tenancy interest of 156 pubs from SA Brain & Co, which trades as Brains, with effect from next February.
Brains will now effectively become a property company with Marston’s agreeing leases on the pubs across South Wales.
There is now a question mark over the future of the brewing operation of Brains and its head office functions in Cardiff. However, the brewery will still supply the pubs under the deal with Marston’s.
With its remaining freehold interest in the pubs the tenancy deal will generate an annual rental income of £5.5m for Brains.
Wolverhampton headquartered Marston’s will operate the 141 freehold pubs on a leasehold basis, with rent chargeable from April 2021. The majority of these will be on inflation linked long lease agreements of 25 years.
Marston’s will also operate 15 short-leasehold sites on a management contract basis for a period of two years.
Pre-covid the pubs were generating an annual Ebitda of £14m.
The pubs will still operate under the Brains brand with staff being transferred over on the same employment terms.
Marston’s currently has 106 pubs in Wales and has undertaken significant investment in newbuild pubs over the last 10 years.
While Brains’ entire pub estate currently closed due to covid restrictions, the reality was that the company was struggling prior to the pandemic.
Last year it sold its remaining stake in what was the fast growing part of its business, Coffee#1, to Caffe Nero.
At the start of the pandemic it instructed corporate advisory firm Evercore to look at options to help safeguard the future of the family-owned business which was established in 1882. That process has now come to fruition with the Marston’s tenancy deal.
Chairman of SA Brain & Co, John Rhys, said that the company had not taken the decision lightly, but recent trading restrictions in Wales due to the pandemic have put huge pressure on the business.
Mr Rhys added: “This agreement marks the formation of a lasting strategic relationship with Marston’s which secures the future of Brains’ pubs and 1,300 of our employees within them.
” We know and trust Marston’s to be excellent custodians of our pubs and, whilst this is not a decision we have taken lightly, we are confident that both our pubs – and our pubs teams – will thrive under their stewardship.
“Furthermore, this transaction enables Brains to recapitalise its balance sheet and continue its long heritage as an independent entity, preserving this great Welsh business for generations to come.
“We thank all our stakeholders and our advisers, Evercore, for their steadfast support which has enabled us to achieve this transaction in these unprecedented times.”
The deal will add to Marston’s 1,368 pubs around the UK.
Chief executive of Marston’s Ralph Findlay said: “This transaction is entirely consistent with Marston’s long-term strategy as a focused pub operator and strengthens our representation in South and West Wales, whilst protecting the heritage and independence of an iconic Welsh business,
“These high quality pubs are a great fit with our existing estate and will benefit from Marston’s scale and operational expertise to further unlock their excellent long-term potential.
“We look forward to the pub teams joining us and to welcoming guests and the communities which they serve, back into these pubs as the country emerges from the pandemic over the weeks and months ahead.”
CAMRA national chairman Nik Antona said:“While we still need to see the detail of this deal, at first glance it appears a positive move. We hope this means that Marston’s will continue to run the pubs as beloved locals, securing their future for the communities that use them and the people they employ.
“Restrictions over the last year due to Covid-19 have put a huge pressure on the hospitality industry. It’s clear that there has not been enough support to protect even a well-established business such as Brains – never mind smaller pubs, breweries and cider producers across Wales.
“This could be the first of many hospitality businesses forced to take drastic action to survive. The UK and Welsh Governments must work together to provide the industry with further financial support now – or we anticipate that there will be even more job losses and closures.”