REG-Fuller,Smith &Turner: Disposal and Trading Update

Fuller Smith & TurnerAnnouncement

25/01/2019 07:20

THIS ANNOUNCEMENT RELATES TO THE DISCLOSURE OF INFORMATION THAT QUALIFIED OR
MAY HAVE QUALIFIED AS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) 596/2014.

FOR IMMEDIATE RELEASE

25 January 2019

Fuller, Smith & Turner P.L.C.

(“Fuller’s” or the “Company”)

Proposed Sale of the Fuller’s Beer Business to Asahi and Trading Update

Fuller’s announces that it has entered into an agreement for the sale of its
entire beer business to Asahi Europe Ltd (“AEL”), a wholly owned
subsidiary of Asahi Group Holdings, Ltd (“Asahi”), for an enterprise value
of £250 million on a debt free, cash free basis (the “Proposed
Disposal”). 

The business being sold comprises the entirety of Fuller’s beer, cider and
soft drinks brewing and production, wine wholesaling, as well as the
distribution thereof, and also includes the Griffin Brewery, Cornish Orchards,
Dark Star Brewing and Nectar Imports (the “Fuller’s Beer Business” or
the “Beer Business”).

Under the terms of the Proposed Disposal, AEL will acquire the brands of the
Beer Business (including “London Pride”) and will receive the benefit of a
licence, on a perpetual, global, exclusive and royalty-free basis, to use
certain trade marks (including the “Fuller’s” name, logo and cartouche)
for the provision of beverages. Ownership of the licensed trade marks will be
retained by Fuller’s.

Having carefully considered its options for the Beer Business and Fuller’s
existing relationship with Asahi, the Board believes that Asahi is the ideal
owner of the Beer Business and will create the right environment for the Beer
Business to flourish in the future and protect the Fuller’s brewing
heritage. The Board welcomes the fact that Asahi also upholds Fuller’s key
values of a genuine commitment to brewing excellence and has a proven track
record as a long-term steward of iconic brands making them an ideal strategic
partner to the Fuller’s pubs and hotels business in the future.  

Following Completion of the Proposed Disposal, Fuller’s will be a focused,
premium pub and hotel operator pursuing its previously stated strategy of
running a stylish, high quality estate, with well-located, well-invested,
predominantly freehold sites that are maintained to the high standards that
customers have come to expect. Fuller’s will form a strategic alliance with
Asahi that will ensure continued access to the high quality premium beer
brands Fuller’s has always brewed.

TRANSACTION HIGHLIGHTS
*
Sale of the Fuller’s Beer Business for an enterprise value of £250 million,
representing a multiple of 23.6x EBITDA (of £10.6 million for the 52 weeks
ending 31 March 2018);
*
The price reflects the strategic value of the brands of the Beer Business
being acquired, the long-term growth potential of the Beer Business under
AEL’s ownership, the value of the Griffin Brewery as well as the expertise
and respected industry knowledge of the people employed within the Beer
Business;
*
Substantial premium to the value attributable to the Company’s Shareholders
if the Beer Business had remained under Fuller’s ownership;
*
A strategic alliance between Fuller’s and Asahi, supported by a Long-Term
Supply Agreement, will allow Fuller’s to continue providing a high quality
beer and cider offering to its customers;
*
Net cash proceeds of the Proposed Disposal are expected to be approximately
£205 million at Completion, taking into account adjustments and after
estimated transaction, Reorganisation and separation costs (the “Net Cash
Proceeds”);
*
A return of proceeds between £55 million to £69 million of the Net Cash
Proceeds is expected to be distributed to Ordinary Shareholders, representing
£1.00 to £1.25 per A and C Ordinary Share and £0.10 to £0.125 per B
Ordinary Share;
*
The Proposed Disposal is not anticipated to impact the level of dividend
payments made by the Company as the Board is intending to declare a final
dividend for each class of Ordinary Shares for the financial year ending 31
March 2019 of an amount at least equal to the final dividend from the prior
financial year and the Board is expecting to maintain a progressive dividend
policy going forward;((1))
*
The Proposed Disposal is conditional upon the passing of two inter-conditional
ordinary resolutions approving the Proposed Disposal, completion of the
Reorganisation and obtaining a relevant confirmation from the UK Competition
and Markets Authority;
*
The Proposed Disposal is expected to complete in the first half of 2019.
*
This statement does not constitute a profit forecast or estimate and should
not be interpreted to mean that future earnings per share, profits, margins,
and/or cash flow will support such a policy.

The Proposed Disposal will enable Fuller’s management to focus on its pubs
and hotels, which is the core of the business and where today 87 per cent of
the Fuller’s operating profits are generated (excluding unallocated costs).
It will also provide significant capital to accelerate investment in the
premium pubs and hotels business both organically and through future
acquisitions. The focus of management will remain unchanged, to be a leading
operator of stylish pubs and hotels, while driving organic growth through
improved marketing and digital communications to grow sales and ensure
relevance to today’s consumer, and through developing the people within the
business.

As a result of the Proposed Disposal, a strategic alliance will be formed to
further strengthen the existing relationship between Fuller’s and Asahi,
where AEL acts as a key supplier to Fuller’s pubs and hotels business. A
Long-Term Supply Agreement with AEL will ensure Fuller’s will continue to
provide the comprehensive high quality beer and cider offering its customers
have come to expect. The Board welcomes this strategic alliance with Asahi, a
leading global brewer, and envisage that the Proposed Disposal will enhance
the ability of management to successfully grow the Fuller’s pubs and hotels
business going forward.

In addition to the expected return of proceeds to Ordinary Shareholders, the
Board also intends to use some of the Net Cash Proceeds to make a contribution
to the Pension Scheme. The remaining funds will be used to grow and further
develop Fuller’s pubs and hotels business.

Under the terms of the Proposed Disposal, all responsibilities relating to the
Pension Scheme would be retained by Fuller’s.

The Proposed Disposal constitutes a Class 1 transaction under the Listing
Rules. Completion is conditional upon, amongst other things, the passing of
two inter-conditional ordinary resolutions approving the Proposed Disposal by
(i) the A, B and C Ordinary Shareholders (the “Ordinary Shareholder
Resolution”) and (ii) the A Ordinary Shareholders (the “A Ordinary
Shareholder Resolution”) (together, the “Resolutions”). Accordingly, a
circular containing full details of the Proposed Disposal, the Resolutions and
eligibility to vote on the Resolutions, the Board’s recommendation and
irrevocable undertakings to vote in favour of the Resolutions, and the notice
convening an Extraordinary General Meeting at which such approval for the
Resolutions will be sought, will be published in due course.

The Company has received irrevocable undertakings from the Directors and
certain other Ordinary Shareholders to vote at the Extraordinary General
Meeting in favour of the Resolutions in amounts representing (in aggregate):
(i) in respect of the A, B and C Ordinary Shareholder Resolution,
approximately 28.19 per cent. of the total issued Ordinary Shares of Fuller's
as at 24 January 2019 (being the latest practicable date prior to publication
of this announcement); and (ii) in respect of the A Ordinary Shareholder
Resolution, approximately 5.62 per cent. of the total issued A Ordinary Shares
of Fuller's as at 24 January 2019 (being the latest practicable date prior to
the publication of this announcement).

Simon Emeny, Chief Executive of Fuller’s, commented:

“This deal secures the future of both parts of our business including
protecting the heritage of the Griffin Brewery in Chiswick, which was
particularly important to the Fuller’s Board. We remain incredibly proud of
the Fuller’s Beer Business, its history and the high quality premium beer
and cider portfolio that we have developed. Brewing has formed an integral
part of our history and brand identity, however the core of Fuller’s and the
driver of our future growth is now our premium pubs and hotels business.”

“I am delighted that this transaction maintains Fuller’s long association
with the Beer Business and that we will continue to enjoy a strong
relationship with Asahi as a key supplier. We look forward to continuing our
alliance and developing a mutually beneficial partnership that will see both
businesses flourish in the future. Asahi, as a company recognised for brewing
excellence, is an appropriate custodian of our rich brewing history and the
Griffin Brewery, and will ensure the Fuller’s Beer Business brands will
reach an even wider global audience.”

Akiyoshi Koji, CEO of Asahi Group Holdings, Ltd, commented:

“We have long admired the brewing business and exceptional beer brands that
Fuller’s has built over the years and the high degree of respect it commands
throughout the global beer industry. Fuller’s is one of the few brewers that
show the same genuine commitment to brewing excellence and quality that we do.
We strongly believe that the brands of the Beer Business, including London
Pride, Frontier and Cornish Orchards among others, complement our premium
portfolio in the UK market. In particular, London Pride is a fantastic brand
with an illustrious heritage dating back to the 1950s and we are excited about
its untapped international potential which Asahi has the scale and global
network to unlock.”

Rothschild & Co is acting as sponsor and sole financial advisor to Fuller’s
on the Proposed Disposal.

There will be a conference call for sellside analysts and investors at 0800
hours (GMT) today.  Please contact Tom Berger at Instinctif Partners on 020
7457 2834 or tom.berger@instinctif.com for dial-in details.

An accompanying slide presentation to the conference call will be available
from 0750hours (GMT) at:

 www.fullers.co.uk/corporate/investors/financial-reports

TRADING UPDATE

The Company also announces today its trading update for the 42 weeks to 19
January 2019.

The Company has delivered a very strong performance since it last reported,
especially in its Managed Pubs and Hotels where like for like sales have risen
5.6 per cent in the last 10 weeks. For the 42 week period, like for like sales
in Managed Pubs and Hotels have risen 4.7 per cent, like for like profits in
Tenanted Inns have risen 2 per cent and total beer and cider volumes in The
Fuller’s Beer Company have remained level.

Simon Emeny, Chief Executive, said: “This is a very good set of figures and
I’m particularly pleased with the way our Managed Pubs and Hotels performed
over the important five week Christmas and New Year trading period. Like for
like sales for December rose 8.7 per cent and our pre-booked covers rose by 16
per cent.

“Since we last reported, we have opened our latest transport hub site, The
Signal Box at Euston, which is proving very popular and have refurbished The
Blackbird at Earl’s Court, including developing nine new boutique bedrooms.
We are on site at The Hercules in Lambeth, which will open before the year
end, and in the next few weeks we will open 15 stylish new bedrooms at The
Counting House in Cornhill, a large freehold site in the heart of the City of
London. We have also transferred another six tenancies to our turnover
agreement.

“As has been widely commented, we are in an uncertain and challenging
consumer environment. However, Fuller’s has well-invested premium pubs and
an excellent team of people, underpinned by a long-term vision and a clear,
well-executed strategy that is proven to grow sales, attract new customers and
deliver returns for our Shareholders.

“We will next update the market on 7 June 2019, when we announce the
Company’s full year results for the 52 weeks to 30 March 2019.”

Enquiries

 Fuller, Smith & Turner P.L.C.                                  020 8996 2000             
 Simon Emeny, Chief Executive                                                             
 Georgina Wald, Corporate Communications Manager                020 8996 2198             
                                                                                          
 Instinctif Partners (Press Relations Adviser to Fuller’s)      020 7457 2020             
 Justine Warren                                                                           
                                                                                          
 Rothschild & Co (Financial Adviser and Sponsor to Fuller’s)    020 7280 5000             
 Akeel Sachak                                                                             
 Jonathan Dale                                                                            
                                                                                          
 Asahi Europe Ltd                                                                         
 Hector Gorosabel, Chief Executive Officer                                                
 Monika Agocs, Group Corporate Affairs Director                 info@asahibeer.eu         

Important information relating to financial advisers

N. M. Rothschild & Sons Limited (“Rothschild & Co”), which is authorised
and regulated by the Financial Conduct Authority in the United Kingdom, is
acting exclusively for Fuller's and for no one else in connection with the
matters described in this announcement and is not, and will not be,
responsible to anyone other than Fuller's for providing the protections
afforded to its clients nor for providing advice in relation to the Proposed
Disposal, the contents of this announcement or any transaction, arrangement or
other matter referred to in this announcement.

Cautionary statement

This announcement is not intended to, and does not constitute, or form part
of, any offer to sell or an invitation to purchase or subscribe for any
securities or a solicitation of any vote or approval in any jurisdiction.
Fuller’s Ordinary Shareholders are advised to carefully read the circular in
relation to the Proposed Disposal once it has been despatched. Any response to
the Proposed Disposal should be made only on the basis of the information in
the circular to follow.

Forward-looking statements

This announcement contains statements which are, or may be deemed to be,
"forward-looking statements" which are prospective in nature. All statements
other than statements of historical fact are forward-looking statements. They
are based on current expectations and projections about future events, and are
therefore subject to risks and uncertainties which could cause actual results
to differ materially from the future results expressed or implied by the
forward-looking statements. Often, but not always, forward-looking statements
can be identified by the use of a date in the future or forward-looking words
such as "plans", "expects", "is expected", "is subject to", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates", "believes",
"targets", "aims", "projects" or words or terms of similar substance or the
negative of those terms, as well as variations of such words and phrases or
statements that certain actions, events or results "may", "could", "should",
"would", "might" or "will" be taken, occur or be achieved. Such statements are
qualified in their entirety by the inherent risks and uncertainties
surrounding future expectations or events that are beyond Fuller's control.
Forward-looking statements include statements regarding the intentions,
beliefs or current expectations of Fuller’s concerning, without limitation:
(i) future capital expenditure, expenses, revenues, earnings, synergies,
economic performance, indebtedness, financial condition, dividend policy,
losses and future prospects; (ii) business and management strategies and the
expansion and growth of the Fuller’s operations; and (iii) the effects of
global economic conditions on the Fuller's business.

Such forward-looking statements involve known and unknown risks and
uncertainties that could significantly affect expected results and are based
on certain key assumptions. Many factors may cause the actual results,
performance or achievements of Fuller’s to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Important factors that could cause the actual
results, performance or achievements of Fuller’s to differ materially from
the expectations of Fuller’s include, among other things, general business
and economic conditions globally, industry trends, competition, changes in
government and other regulation (including licensing) and policy, including in
relation to the environment, health and safety and taxation, labour relations
and work stoppages, interest rates and currency fluctuations, changes in its
business strategy, the outcome of any litigation, the impact of any
acquisitions or similar transactions, information technology system and
technology failures, political and economic uncertainty and other factors.
Such forward-looking statements should therefore be construed in light of such
factors. Neither Fuller’s nor any of its directors, officers or advisers
provides any representation, assurance or guarantee that the occurrence of the
events expressed or implied in any forward-looking statements in this
announcement will actually occur. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. Forward-looking statements contained in this announcement apply only
as at the date of this announcement. Other than in accordance with its legal
or regulatory obligations (including under the Listing Rules and the
Disclosure Guidance and Transparency Rules), Fuller’s is not under any
obligation and Fuller’s expressly disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

The release, publication or distribution of this announcement in jurisdictions
other than the United Kingdom may be restricted by law and therefore any
persons who are subject to the laws of any jurisdiction other than the United
Kingdom should inform themselves about, and observe, any applicable
requirements. This announcement has been prepared for the purposes of
complying with the Listing Rules and the information disclosed may not be the
same as that which would have been disclosed if this announcement had been
prepared in accordance with laws and regulations of any jurisdiction outside
of England.

INTRODUCTION

The Company announces that it has entered into an agreement under which AEL
will acquire the Fuller’s Beer Business for an enterprise value of £250
million on a debt free, cash free basis (the “Consideration”). The
Retained Group will be a focused premium pub and hotel company comprising the
existing Fuller’s pubs and hotels business.  The £250 million
Consideration implies a multiple of 23.6x EBITDA (of £10.6 million for the 52
weeks ending 31 March 2018).

The Consideration is payable in full and in cash on the date of Completion,
subject to customary adjustments based on the amount of working capital, debt
and cash in the Beer Business at Completion. The Proposed Disposal will be
effected through the sale of the entire issued share capital of The Fuller’s
Beer Company Ltd (which has recently been incorporated to acquire certain
assets and liabilities of the Fuller's Beer Business), Cornish Orchards, Dark
Star Brewing and Nectar Imports.

In view of its size, the Proposed Disposal constitutes a Class 1 transaction
under the Listing Rules. Completion is conditional upon, amongst other things,
the passing of the Resolutions. Accordingly, a circular containing full
details of the Proposed Disposal, the Resolutions and eligibility to vote on
the Resolutions, the Board’s recommendation, irrevocable undertakings to
vote in favour of the Resolutions, and the notice convening an Extraordinary
General Meeting at which such approval for the Resolutions will be sought,
will be published in due course.

BACKGROUND TO AND REASONS FOR THE PROPOSED DISPOSAL

The Beer Business has been an important part of the Fuller’s history and
brand identity and its premium beers and ciders are a key part of what
differentiates Fuller’s from its competitors. However, the Board believes
that the core of Fuller’s today, and the driver of future growth, is the
Fuller’s pubs and hotels business.  In the 52 weeks to 31 March 2018, the
Fuller’s pubs and hotels business accounted for 75 per cent of external
revenues, 87 per cent of operating profit (excluding unallocated costs) and
has grown at 6 per cent p.a (based on revenues from £269.9 million for the 52
weeks ending 26 March 2016 to £301.4 million for the 52 weeks ending 31 March
2018). 

The Proposed Disposal will allow Fuller’s management to focus solely on the
core of the business and it will provide significant capital to accelerate
investment in the premium pubs and hotels business both organically and
through future acquisitions. The focus of management will remain on driving
organic growth through improved marketing and digital communications to grow
sales and ensure relevance to today’s consumer, and through developing the
people within the business.

Given the existing relationship between the parties, with Asahi being a
current key supplier to Fuller’s pubs and hotels business, and Asahi’s
focus on brewing quality and brand building, Asahi was considered the ideal
owner of the Beer Business and a valuable partner for Fuller’s. The Board
believes that Asahi will foster an environment in which the Beer Business can
flourish, both in the UK and internationally. Furthermore, the Board welcomes
the fact that Asahi also views the Griffin Brewery as an integral part of
Fuller’s Beer Business and intends to continue brewing on the site. The
Board also believes that Asahi upholds Fuller’s key values of a genuine
commitment to brewing excellence and that Asahi has a proven track record as a
long-term steward of iconic brands around the world.

The sale of the Beer Business does not end the Company’s association with
the brands of the Beer Business. Fuller’s and AEL will form a strategic
alliance by entering into a Long-Term Supply Agreement for the supply of the
brands of the Beer Business (and selected Asahi brands) to Fuller’s pubs and
hotels business. This will mean that Fuller’s staff and management will be
able to continue to cherish, value and promote Fuller’s beer and cider
brands and will enable Fuller’s customers to continue to enjoy their
Fuller’s beer of choice.

Recent structural changes to the beer industry, which have resulted in
material economies of scale benefiting global brewers and a progressive beer
duty spawning small brewers (resulting in over 2,000 breweries in the UK),
have been challenging for the mid-sized Beer Business to navigate while
maintaining the commitment made to customers to brew exceptional,
award-winning beer at Fuller’s historic Chiswick home. In response to the
challenges faced, the Beer Business has made a number of successful
acquisitions including Cornish Orchards (a premium cider and soft drinks
maker), Dark Star Brewing (a craft cask brewer) and Nectar Imports (a boutique
drinks wholesaler). The Beer Business has also developed exciting new products
(most notably Frontier Premium London Lager) as a way of driving volumes
without the scale or financial capacity that larger competitors have to invest
behind their brands.

Given the structural changes outlined, and Fuller’s limited financial
resources relative to global brewers, the Company’s ability to add further
value and drive organic growth in the Beer Business and its brands is
constrained. For these reasons, the Board views the Proposed Disposal as
achieving significant long-term value creation for Shareholders and it will
provide the Company with significant capital to invest in its premium pub and
hotels business in order to drive future growth.

INFORMATION ON THE FULLER’S BEER BUSINESS

The Beer Business comprises the brewing, marketing and distribution of a
portfolio of iconic premium beers including London Pride, Frontier Premium
London Lager, a variety of cask and craft keg beers supported by a changing
seasonal range as well as cider, wines, spirits and soft drinks. Following a
number of recent acquisitions, it now also comprises:
*
Cornish Orchards – a premium cider and soft drinks maker, based in Cornwall,
United Kingdom which produces ciders and premium soft drinks;
*
Dark Star Brewing – a craft cask brewer, based in Sussex, United Kingdom and
which was acquired by Fuller’s in February 2018; and
*
Nectar Imports – a boutique drinks wholesaler.

Fuller’s main production facility is the historic Griffin Brewery in
Chiswick, London, where brewing has taken place continuously since 1654.
Additional production facilities are located in Cornwall and Sussex which are
associated with Cornish Orchards and Dark Star Brewing respectively. A
distribution centre is located in Horndean and Nectar Imports has a head
office and distribution centre in Wiltshire. As part of the transaction, AEL
will take control of all of these facilities. Products are sold into
Fuller’s pubs and hotels, national pub chains, independent pub operators,
supermarkets across the United Kingdom and exported to over 80 countries
internationally.  To provide a comprehensive offering to customers, the Beer
Business also distributes selected third party brands alongside its own
portfolio of premium brands.

INFORMATION ON THE PURCHASER

AEL is a wholly owned subsidiary of Asahi Group Holdings, a global beverage
and food company listed on the Tokyo Stock Exchange in Japan with a market
capitalisation of £14.8 billion((2)) as at 24 January 2019 (being the latest
practicable date prior to this announcement), and FY2017 sales and EBITDA of
£14.6 billion((2)) and £2.0 billion((2)) respectively. Asahi was founded in
Osaka, Japan in 1889 as the Osaka Beer Brewing Company with the goal of
producing authentic and distinct Japanese beer to suit Japanese consumer
tastes.

Asahi aspires to be a clear leader in brewing quality and production
technology, and is well-recognised for adhering to industry-leading standards.
This commitment to high quality has been followed throughout Asahi’s history
since opening its first brewery in 1889.

In Europe, AEL has an unrivalled portfolio of iconic premium beers including
Peroni, Grolsch and Meantime following the acquisition of these brands and
related businesses of SABMiller from AB InBev in October 2016. Supported by
state-of-the-art breweries, quality ingredients, and a culture that fosters
innovation and encourages collaboration, AEL aims to bring the best quality of
beer to their customers worldwide. The company has a significant international
presence servicing customers in over 80 countries through its operations in
the Netherlands, Italy, the United Kingdom, France, Canada and a global
partner network that serves Europe, Africa, Asia and Latin America.

(2)          based on the exchange rate of £:¥ of 1:142.86 as at 24
January 2019 (being the latest practicable date prior to the publication of
this announcement)

SUMMARY OF THE TERMS OF THE PROPOSED DISPOSAL

The Proposed Disposal is being made pursuant to the terms of the Sale and
Purchase Agreement. Under the Sale and Purchase Agreement, Fuller's has agreed
to sell its Beer Business for an enterprise value of £250 million on a debt
free, cash free basis, subject to certain conditions to Completion. The
Consideration is payable by the Purchaser in cash on Completion, subject to
customary adjustments based on the amount of working capital, debt and cash in
the Fuller's Beer Business at Completion.

The Sale and Purchase Agreement contains certain warranties and indemnities
given by each of Fuller's and the Purchaser which are customary for a
transaction of this nature. 

Completion of the Proposed Disposal is conditional upon the satisfaction (or
waiver, where applicable) of the following conditions:
*
approval of the Resolutions by the A, B and C Ordinary Shareholders as well as
the A Ordinary Shareholders at the Extraordinary General Meeting;
*
completion of a corporate reorganisation by Fuller’s to transfer certain
assets and liabilities of its Beer Business to The Fuller’s Beer Company
Ltd; and
*
obtaining a relevant confirmation from the UK Competition and Markets
Authority in relation to the Disposal (Antitrust Condition).

Under the Sale and Purchase Agreement, AEL has undertaken to pay Fuller’s
£2.5 million if the Antitrust Condition is not satisfied by 31 July 2019 and
the Sale and Purchase Agreement is terminated.

Fuller’s has undertaken to pay AEL £2.5 million if the Sale and Purchase
Agreement is terminated for any reason other than as a result of the Antitrust
Condition not being satisfied and either: (i) Fuller’s announces the sale of
its Beer Business (or substantially all of the assets of the Beer Business) to
a third party within 12 months of the date of the Sale and Purchase Agreement;
(ii) a takeover offer is made by a third party for Fuller’s and, prior to
the earlier of Completion and 31 July 2019, the Fuller’s Board recommends
the takeover offer, the Fuller’s Board does not recommend Shareholders
approve the Resolutions or the takeover offer becomes unconditional as to
acceptances; or (iii) the A Ordinary Shareholder Resolution is not approved by
A Ordinary Shareholders at the Extraordinary General Meeting.

In addition, Fuller's has agreed the terms of various agreements with the
Purchaser which are intended to be entered into on Completion.  These
agreements are:
*
a Long-Term Supply Agreement which will govern the supply to Fuller’s of:
(i) beer, cider and other beverage products produced by the Fuller's Beer
Business which AEL will acquire pursuant to the Proposed Disposal; (ii) beer,
cider and other beverage products produced by AEL; (iii) wine; (iv) delivery
and distribution services in connection with third party products; and (v)
certain technical support services in connection with the provision of the
above to Fuller’s pubs and hotels.  The Long-Term Supply Agreement is for
an initial term of five years and each party has the option to renew the
agreement for a further five-year term;
*
a brand licence agreement which will govern the terms under which Fuller’s
licenses to The Fuller’s Beer Company Ltd, on a perpetual, global, exclusive
and royalty-free basis, certain trade mark rights (including the
“Fuller’s” name, logo and cartouche) for the provision of beverages. 
Ownership of the licensed trade mark rights will be retained by Fuller’s.
The brand licence agreement also contains mutual obligations to maintain
Fuller’s respected brand reputation; and
*
a transitional services agreement which will govern the provision of services
between the Retained Group and the Fuller's Beer Business for a transitional
period after Completion.

The Board expects that, subject to the satisfaction and/or waiver (where
applicable) of the conditions precedent to the Proposed Disposal, Completion
will occur in the first half of 2019. 

Both Fuller’s and AEL attach great importance to the skills, experience and
industry knowledge of the Beer Business employees. It is expected that the
majority of employees will remain with the Beer Business following Completion.
However, subject to the outcome of legally-required consultation processes,
certain employees may not have a role with AEL. Any redundancy proposals for
any such employees who Fuller’s is unable to redeploy will reflect the
valued contribution of such employees to the Beer Business over the years.

Under the terms of the Proposed Disposal, all liabilities relating to the
Pension Scheme would be retained by Fuller’s.

USE OF PROCEEDS, FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL AND FUTURE
STRATEGY

Return of proceeds to Ordinary Shareholders

The Company expects to return a total amount between £55 million to £69
million of the Net Cash Proceeds to Ordinary Shareholders which represents
£1.00 to £1.25 per A and C Ordinary Share and £0.10 to £0.125 per B
Ordinary Share. The Board will evaluate the amount and optimal way to
distribute the Net Cash Proceeds to Ordinary Shareholders.

The Board also intends to use some of the Net Cash Proceeds to make a
contribution to the Pension Scheme and intends to initiate discussions with
the trustees of the Pension Scheme regarding the proposed return of proceeds.
All remaining funds will be used to grow and further develop the Fuller’s
pubs and hotels business.

Financial effects of the Proposed Disposal on the Retained Group

In the 26 weeks ended 29 September 2018, the Beer Business contributed EBITDA
of £5.6 million and operating profit of £3.7 million to the Fuller's Group.

As at 29 September 2018, the Beer Business had total gross assets of £83.4
million.

The Net Cash Proceeds arising from the Proposed Disposal are expected to be
approximately £205 million at Completion, after relevant adjustments
including estimated transaction, Reorganisation and separation costs. 

Fuller’s recognises the importance of regular semi-annual dividends.
Accordingly it is the Board’s current intention to declare a final dividend
for the financial year ending 31 March 2019 of an amount at least equal to the
final dividend of 12.00 pence per A Ordinary Share and C Ordinary Share and
1.2 pence per B Ordinary Share declared for the 52 weeks ended 31 March 2018.
Going forward, the Board intends to maintain a progressive dividend policy.
This statement does not constitute a profit forecast or estimate and should
not be interpreted to mean that future earnings per share, profits, margins,
and/or cash flow will support such a policy.

Future strategy

Following Completion, Fuller’s intends to continue to pursue its successful
stated strategy of ensuring its estate remains stylish, high quality and
relevant to today’s discerning customer with even more focus than before.
Fuller’s strategic vision will remain unchanged – to continue to be a
leading operator of stylish pubs and hotels while growing through investment
in carefully selected acquisitions and development. Our objective will remain
on building a sustainable premium business for the long-term through
developing and investing in the best people.

The Retained Group’s predominantly freehold sites will be focused on the
affluent areas in the south of England, and diversified across premium Managed
Pubs and Hotels as well as Tenanted Inns.

The Retained Group will continue to focus on delivering memorable customer
experiences through outstanding service and hospitality from well-trained and
motivated team members and a clear product offering around fresh, local food
prepared on site by skilled chefs, supported by a portfolio of interesting and
exciting premium drinks brands and boutique hotel accommodation. 

The Proposed Disposal supports a further strengthening of the balance sheet
enabling Fuller’s to pursue attractive acquisition opportunities. In the
future, the Retained Group intends to grow through continued development and
investment in the Fuller’s pubs and hotels business and through acquisitions
that have been carefully selected to further build on the current strategy of
focusing on affluent areas in the south of England that enhance the
Company’s premium offering. The Company will also continue to seek new
opportunities to add further boutique bedrooms to existing sites and build on
this part of the business.

Fuller’s Tenanted Inns division will pursue its existing strategy of
continuing to build its partnership business, including further rolling out
its turnover-rent agreement that improves access to, and support from, the
head office functions of Fuller’s pubs and hotels business for its tenanted
business partners.

EXTRAORDINARY GENERAL MEETING

The Company will be sending a circular to Shareholders in due course
containing further details of the Proposed Disposal and convening an
Extraordinary General Meeting for the purpose of seeking Ordinary Shareholder
and A Ordinary Shareholder approval for the Proposed Disposal.

FINANCIAL AND LEGAL ADVICE

The Board has received financial advice from Rothschild & Co as sponsor and
financial adviser in relation to the Disposal. In providing its financial
advice to the Board, Rothschild & Co has taken into account the Board’s
commercial assessment of the Proposed Disposal.

Freshfields Bruckhaus Deringer LLP has provided legal advice to the Company in
relation to the Proposed Disposal.

RECOMMENDATION TO ORDINARY SHAREHOLDERS

In the Board’s view, the Proposed Disposal maximises value for Shareholders
with the Retained Group being well placed to pursue the Company’s strategic
vision of being the leading operator of stylish pubs and hotels.

The simplification of the Fuller’s business and proceeds from the Proposed
Disposal will also allow Fuller’s to focus management and financial
resources on its fast-growing and successful pubs and hotels business, which
today represents 87 per cent of Fuller’s operating profit (excluding
unallocated costs).

The Board therefore considers the Proposed Disposal to be in the best
interests of Shareholders as a whole. Accordingly, the Board intends to
recommend that Ordinary Shareholders and A Ordinary Shareholders vote in
favour of the Resolutions to be proposed at the Extraordinary General Meeting
in due course.

The Directors have each irrevocably undertaken to vote at the Extraordinary
General Meeting in favour of the: (i) Ordinary Shareholder Resolution in
respect of the Ordinary Shares to which they are beneficially entitled
(representing approximately 6.16 per cent of the total issued Ordinary Shares
of Fuller's as at 24 January 2019 (being the latest practicable date prior to
the publication of this announcement)); and (ii) A Ordinary Shareholder
Resolution in respect of the A Ordinary Shares to which they are beneficially
entitled (representing approximately 1.35 per cent of the total issued A
Ordinary Shares of Fuller's as at 24 January 2019 (being the latest
practicable date prior to the publication of this announcement)).

Certain other Ordinary Shareholders have given irrevocable undertakings to
vote at the Extraordinary General Meeting in favour of the: (i) Ordinary
Shareholder Resolution in respect of the Ordinary Shares to which they are
beneficially entitled (representing approximately 22.03 per cent. of the total
issued Ordinary Shares of Fuller's as at 24 January 2019 (being the latest
practicable date prior to the publication of this announcement)); and (ii) A
Ordinary Shareholder Resolution at the Extraordinary General Meeting in
respect of the A Ordinary Shares to which they are beneficially entitled
(representing approximately 4.27 per cent. of the total issued A Ordinary
Shares of Fuller's as at 24 January 2019 (being the latest practicable date
prior to the publication of this announcement)).   

Appendix

The following definitions apply throughout this announcement, unless the
context otherwise requires:

“AEL” or “Purchaser”: means Asahi Europe Ltd, a wholly owned
subsidiary of Asahi Group Holdings, Ltd.

“A Ordinary Shareholders”: means the holders of A Ordinary Shares from
time to time.

“A Ordinary Shareholder Resolution”: means the ordinary resolution to
approve the Proposed Disposal to be considered by A Ordinary Shareholders.

“A Ordinary Shares”: means the A ordinary shares of 40 pence each in the
capital of the Company.

“Asahi”: means Asahi Group Holdings, Ltd.

“Board”: means the board of directors of the Company.

“Company” or “Fuller’s”: means Fuller, Smith & Turner P.L.C.

“Completion”: means completion of the Proposed Disposal in accordance with
the provisions of the Sale and Purchase Agreement.

“Consideration”: has the meaning given to it in the Announcement.

“Cornish Orchards”: means Cornish Orchards Ltd.

“Dark Star Brewing”: means The Dark Star Brewing Company Limited.

“Directors”: means the directors of the Company.

“Disclosure Guidance and Transparency Rules”: means the Disclosure
Guidance and Transparency Rules made by the FCA for the purposes of Part VI of
FSMA, as amended from time to time.

“EBITDA”: means earnings before interest, taxation, depreciation and
amortisation.

“Extraordinary General Meeting”: means the Extraordinary General Meeting
of the Company to be convened for the purpose of approving the Resolutions. 

“FCA”: means the Financial Conduct Authority of the UK.

“FSMA”: means the Financial Services and Markets Act 2000, as amended from
time to time.

“Beer Business”: means the division of the Company which comprises the
entirety of Fuller’s beer, cider and soft drinks brewing and production,
wine wholesaling, as well as the distribution thereof, and also includes the
Griffin Brewery, Cornish Orchards, Dark Star Brewing and Nectar Imports.

“Fuller’s Group”: means, in respect of any time prior to Completion, the
Company and its consolidated subsidiaries and subsidiary undertakings and, in
respect of any time following Completion, the Retained Group.

“Pension Scheme”: means the  Fuller, Smith & Turner P.L.C. pension plan
(a defined benefit pension scheme operated by the Company for eligible
employees which closed to future accrual in January 2015).

“Fuller’s pubs and hotels” or “pubs and hotels business”: means
together the Managed Pubs and Hotels and the Tenanted Inns.

“Griffin Brewery”: means the brewery at Griffin Brewery, Chiswick Lane
South, Chiswick, London, W4 2QB.

 “Listing Rules”: means the Listing Rules made by the FCA for the
purposes of Part VI of FSMA, as amended from time to time.

“London Stock Exchange”: means London Stock Exchange P.L.C., of 10
Paternoster Square, London, EC4M 7LS.

“Long-Term Supply Agreement”: means the long-term supply agreement to be
entered into between the Company and the Purchaser as described in more detail
above.

“Managed Pubs and Hotels”: means the division of the Company comprising
the managed pubs business, managed hotels business and the business conducted
by The Stable Pizza & Cider Limited and Bel & The Dragon.

“Nectar Imports”: means Nectar Imports Limited.

“Net Cash Proceeds”: has the meaning given to it in this Announcement.

 “Ordinary Shareholder Resolution”: means the ordinary shareholder
resolution to approve the Proposed Disposal to be considered by Ordinary
Shareholders.

“Ordinary Shareholder(s)”: means the holders of Ordinary Shares from time
to time.

“Ordinary Shares”: the A Ordinary Shares of 40 pence each, the B Ordinary
Shares of 4 pence each and the C Ordinary Shares of 40 pence each in the
capital of the Company.

“Proposed Disposal”: has the meaning given to it in this Announcement.

“Reorganisation”: means a corporate reorganisation by Fuller’s to
transfer certain assets and liabilities of the Beer Business which are held by
Fuller’s to The Fuller’s Beer Company Ltd.

“Resolutions”: means the inter-conditional ordinary resolutions to approve
the Proposed Disposal, consisting of the Ordinary Shareholder Resolution and
the A Ordinary Shareholder Resolution.

“Retained Group”: means the Company and its subsidiaries and subsidiary
undertaking from time to time (excluding, for the avoidance of doubt, the Beer
Business after Completion), being the continuing business of the Fuller’s
Group following Completion.

“Rothschild & Co”: means N.M. Rothschild & Sons Limited at New Court, St.
Swithin’s Lane, London, EC4N 8AL.

 “Sale and Purchase Agreement”: means the sale and purchase agreement
dated 25 January 2019 entered into between the Company and AEL in connection
with the Proposed Disposal.  

“Shareholder(s)”: means the holder(s) of Shares from time to time.

“Share(s)”: means the A Ordinary Shares of 40 pence each, the B Ordinary
Shares of 4 pence each, the C Ordinary Shares of 40 pence each, the first 6
per cent cumulative preference shares of £1 each, and the second 8 per cent
cumulative preference shares of £1 each in the capital of the Company.

“Sponsor”: means Rothschild & Co.

“Tenanted Inns”: means the division of the Company which comprises the
pubs operated by third parties under tenancy or lease agreements.

“The Fuller’s Beer Company”: means The Fuller’s Beer Company Ltd.

“UK” or “United Kingdom”: means the United Kingdom of Great Britain
and Northern Ireland.

Sources

Historical financials sourced from Fuller’s Reported Accounts with the
exception of gross assets which are not publicly disclosed by Fuller’s and
have been sourced from underlying reporting systems.

Certain figures in this announcement have been subject to rounding
adjustments.



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