London Is Losing Pride, But Don't Blame Brexit

(Bloomberg Opinion) -- London is losing its Pride. On Friday, Britain’s Fuller, Smith & Turner Plc agreed to sell its 174-year-old brewing operation to Asahi Group Holdings Ltd. of Japan.

It might be tempting to see the sale as a symbol of the U.K.’s present political malaise -- but this deal is anything but a Brexit bargain. Fuller has extracted a high price from a buyer eager to pay up to bolster its European portfolio. If you are going to sell the crown jewels, this is the way to do it.

Fuller’s had found itself in an increasingly uncomfortable position in recent years, squeezed between rapidly consolidating giants like AB InBev and the burgeoning craft beer movement. Before Friday’s announcement, the stock had dropped 6.5 percent over the past three years.

The company needed to find a buyer for its beer business that had scale, distribution and helpfully deep pockets. A disposal would generate cash to invest in its more lucrative pubs and hotels arm, which accounts for about two-thirds of operating profit.

Asahi is paying 250 million pounds ($327 million) – just under half Fuller’s entire market value and 23.6 times the unit’s trailing Ebitda. That's far more than average 13 times Ebitda multiple seen in recent deals in the industry.

The Japanese group has been building its presence in Europe, buying the Peroni, Grolsch and Meantime labels in April 2016 for $2.9 billion, and snapping up SABMiller's beer brands in central and Eastern Europe for $7.8 billion six months later. Both of these deals helped to smooth the way for regulators to approve AB Inbev’s blockbuster $100 billion takeover of SABMiller.

Fuller’s beer business expands that portfolio, adding to its presence in London. Brewers are eager to sell to young, urban populations and brands like London Pride fit the bill. There could also be an opportunity for Asahi to cross sell some of its other beers.

It also helps that the purchaser will get the freehold to Fuller's brewery in west London. While the seller is confident Asahi will keep this site open, the Chiswick brewery, with its enviable Thames-side location, would be a highly tempting redevelopment opportunity.

For Fuller’s, the deal should help to buck some of the Brexit gloom. But for London’s beer drinkers, the sight of another historic brewery being turned into flats would be bitter sign of how the capital is changing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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