(35,27 EUR, 1,48%) announced it has acquired the UK-based Galaxy Pub Estate group from for L 421m on a cash-and-debt-free basis, excluding another L 10m payment to (20,88 GBp, 1,61%) for the settlement of accrued amounts relating to the existing management agreement. Galaxy operates 918 pubs in the UK.
pays about 8.1x trailing 12month EBITDA if we include the L 10m payment to . The provisional fair value of the pubs on Heineken’s balance sheet will be L 378m. will post a L 28m one-off expense in 4Q11 relating to the early amortization and termination of contracts.
expects the acquisition to be earnings accretive from December 2011 while being value enhancing in the first year after completion.
The acquisition of Galaxy strengthens Heineken’s existing UK pub portfolio of 462 outlets. Despite the claim of being value enhancing in year one, we would have preferred to either invest in activities with higher growth prospects (European beer market is structurally contracting and one-trade is declining faster than the overall market) either to give money back to shareholders at some point. Despite our disliking of this acquisition, we do stick to our BUY on the attractive valuation.