REG - Marston's Plc - Disposal of 40% Stake in Brewing JV

Marston'sAnnouncement

08/07/2024 07:00

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RNS Number : 4654V  Marston's PLC  08 July 2024

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

8 July 2024

MARSTON'S PLC TO DISPOSE OF 40% STAKE IN BREWING JV TO BECOME A FOCUSED PUB
BUSINESS

Marston's PLC ("Marston's" 1  (#_edn1) ) today announces the sale of its
remaining non-core brewing assets to create a business entirely focused on
pubs, with a binding agreement to sell the whole of its 40% interest in
Carlsberg Marston's Limited ("CMBC") to a subsidiary of Carlsberg A/S
("Carlsberg") (the "Transaction") for £206 million in cash.

·      Value-creating sale of interest in CMBC to Carlsberg for £206
million in cash

·      Establishes a purely focused pub business with a strong position
in the UK market and significant opportunities for further growth

·      Delivers on stated de-leverage strategy creating a stronger
balance sheet and a step change in financial flexibility

·      Marston's will continue its strong partnership with CMBC through
the long-term brand distribution agreement which remains in place

·      Attractive valuation, representing an enterprise value 2 
(#_edn2) multiple of 14.5 times EBITDA 3  (#_edn3) and 24.3 times EBIT 4 
(#_edn4) for the 12-month period ended 31 December 2023

·      Net proceeds 5  (#_edn5) used for significant debt paydown,
achieving medium-term target of <£1 billion of net debt (excluding IFRS 16
lease liabilities) in a significantly accelerated time frame. March 2024
pro-forma adjusted net debt of c.£959 million 6  (#_edn6)

·      The Board of Directors believe that the value to be achieved by
the proposed Transaction represents an attractive result for Marston's
shareholders with the Marston's Group's interest expense to reduce by c.£18
million annually versus the Board's expectations and the overall outcome
earnings accretive

Justin Platt, Chief Executive Officer, commented:

"Today's announcement represents a significant milestone for Marston's as we
realise our stake in CMBC. In my first six months with the business, it has
become very clear to me that our core capability and key opportunity to unlock
value for shareholders is in driving a focused and successful pub business.

This deal further strengthens our balance sheet, significantly reducing our
debt by over £200 million. In addition, CMBC remain valued strategic partners
and we continue to benefit from our ongoing long-term brand distribution
agreement with them. Crucially, it allows us to become a pure play hospitality
business and focus on what we do best - namely, giving our guests amazing pub
experiences. I look forward to delivering on the opportunities a focused pub
business will provide to ensure we maximise value for our shareholders."
 

Focused pub business

The full exit from CMBC will create a pure play hospitality business focused
on pubs whilst retaining the benefits of a long-term brand distribution
agreement with CMBC as a key supplier and strategic partner.

Pubs are at the heart of UK socialising, the UK pub market offers significant
opportunities to capitalise on and drive value for shareholders. Marston's pub
business is built on strong fundamentals; a suburban-dominated, predominantly
freehold estate of c.1,370 pubs combined with a balance of managed and
partnership ('franchised'), tenanted and leased pubs allows the Group to
optimise its consumer offering and deliver a highly cash generative operating
model.

This Transaction allows Marston's to further build on those strong
fundamentals and accelerate progress in driving the success of the pub
business and demonstrates management's preparedness to take decisive steps
that will drive shareholder value. Further detail on Marston's priorities and
focus will be outlined at an investor day in the Autumn.

Sale of CMBC transaction summary

In 2020, CMBC was formed to combine the strengths of both Marston's and
Carlsberg, leveraging complementary drink portfolios and an extensive
distribution network. Over the last three years, this partnership has played a
significant role in enhancing CMBC's customer offering.

Whilst Marston's believes that CMBC is well-positioned for future success as a
market leader under Carlsberg's sole ownership, they have been challenged by a
number of unforeseen macro and socio-economic factors, including Covid-19,
higher operating costs and inflation. Furthermore, as announced on 2 July
2024, the licensed production and distribution agreement for San Miguel with
CMBC in the UK will not be renewed beyond 31 December 2024.

The attractive upfront cash payment reflects the breadth of the CMBC brand
portfolio. The offer of £206 million is not subject to any value adjustment
mechanism and represents a multiple of 14.5 times EBITDA(3) and 24.3 times
EBIT(4) for the 12-month period ended 31 December 2023. The cash proceeds will
provide immediate financial benefits to Marston's through material debt
paydown and ensure that Marston's can capitalise fully on the opportunities
within its core pub business.

Furthermore, the Transaction removes the distraction of non-core assets over
which Marston's has no day-to-day operational control and enables further
simplification. The Transaction also removes the corresponding volatility and
uncertainty within Marston's earnings profile.

When taking into account the initial formation of CMBC, whereby Marston's
received proceeds of £267 million 7  (#_edn7) and contributed its brewing
assets at a valuation representing a multiple of 12.9 8  (#_edn8) times EBITDA
for the 12-month period ended 31 December 2019, Marston's will have exited its
brewing operations for a total consideration of £473 million. Additionally,
Marston's has received an incremental £54.8 million 9  (#_edn9) of dividends
from CMBC since 2020. Under the Transaction, no further dividend would be
payable to Marston's.

CMBC will continue to supply Marston's through the long-term brand
distribution agreement (the "SDA") that was entered into upon formation of
CMBC in 2020. The terms of the SDA have been updated without material change,
to reflect the end of the joint venture between Marston's and Carlsberg and
termination of the shareholders' agreement relating to CMBC (the "SHA").
Marston's looks forward to continuing its strong partnership with CMBC as a
customer under the SDA.

The Transaction constitutes a Class 1 transaction for Marston's under the
current UK Listing Rules and is, therefore, as at the date of this
announcement, conditional on Marston's shareholders passing a resolution
approving the Transaction (the "Shareholder Approval Condition"). The
Transaction is not subject to any other conditions. The Shareholder Approval
Condition can be waived by Marston's (at its discretion) to take account of
the fact that the UK Listing Rules are expected to change in the summer of
2024 in a manner that would mean the Shareholder Approval Condition is no
longer required for Class 1 transactions. If the UK Listing Rules are amended
within an appropriately short time frame, the directors propose to waive the
Shareholder Approval Condition. If the UK Listing Rules are not amended within
an appropriately short time frame, the directors would seek shareholder
approval for the Transaction. A further announcement will be made if and when
appropriate.

Completion is targeted before the end of September 2024 (the long-stop date
for completion of the Transaction is 15 December 2024). In connection with
Carlsberg's proposed acquisition of Britvic plc, as referenced in Carlsberg's
announcement of its firm intention to make an offer for Britvic plc under Rule
2.7 of the City Code on Takeovers and Mergers separately released today (the
"Carlsberg Transaction"), Marston's has waived certain non-compete
restrictions under the SHA for the purposes of the Carlsberg Transaction only
for a limited period of time (the "Waiver"). The Waiver is not conditional on
completion of the Transaction, it is restricted in time, and it is limited to
the Carlsberg Transaction only.

The Board of Marston's has unanimously approved the Transaction and believes
it is in the best interest of all of its shareholders.

Key financial information of CMBC

To assist with the assessment of the valuation of CMBC and pro-forma impact on
Marston's, below is a summary of the key financials.

 

 Marston's historical financials
 £ million unless otherwise stated   12m to 1-Oct-22   12m to 30-Sep-23  6m to 30-Mar-24
 Income from CMBC                    3.3               9.9               (0.6) 10  (#_edn10)
 Dividend from CMBC                  19.4              21.6              13.8
 Book value of CMBC                  260.3             250.9             220.7

 

Use of proceeds and financials effects of the Transaction

Marston's will use the net proceeds to de-leverage, including paying down the
private placement and banking facilities, following which Marston's expects
the Marston's Group's overall interest expense to reduce by c.£18 million
annually versus the Board's current expectations.

The Group's £300 million bank facilities were drawn down by £232 million as
at March 2024 and the private placement is in the sum of £40 million. On a
pro-forma basis, including the net proceeds from the Transaction of c.£202
million (after estimated fees and restructuring costs of c.£4 million),
adjusted net debt as at March 2024 would have been c.£959 million(6). We do
not expect any material tax to be payable by Marston's.

Consequently, Marston's has achieved its 2026 net debt (excluding IFRS 16
lease liabilities) target of <£1 billion in a significantly accelerated
timeframe. Marston's will continue to be focused on debt reduction and be
disciplined in the use of cash to deliver superior returns through focused
capital investment in the estate.

Marston's expects to put financing in place that is better suited to the new
level of leverage in due course and will update as and when appropriate. In
addition, Marston's will provide an update to the existing capital allocation
framework at an investor day in the Autumn.

The Transaction is expected to be accretive on adjusted earnings per share
when taking into account the interest cost savings. The Board believes that
the Transaction will support the Group in driving improved performance through
increased financial flexibility and fully aligns and supports the strategic
objective of a focused pub company.

The pro-forma impact on net assets for Marston's is a reduction of c.£19
million, given book value of CMBC of £220.7 million at HY 2024 and net
proceeds from the Transaction of c.£202 million after estimated fees and
restructuring costs.

The person responsible for arranging for the release of this announcement on
behalf of Marston's is Bethan Raybould, General Counsel and Company Secretary.

Advisers

In connection with the Transaction, J.P. Morgan Cazenove is acting as sole
financial adviser and Sponsor to Marston's, and Slaughter and May is acting as
legal adviser to Marston's.

Enquiries:

Marston's
PLC
             Tel: 01902 329 516

Justin Platt, Chief Executive Officer

Hayleigh Lupino, Chief Financial Officer

Instinctif
Partners
            Tel: 020 7457
2020

Justine Warren

Matthew Smallwood

Joe Quinlan

J.P. Morgan
Cazenove
            Tel: 020 3493
8000

James Mitford

Dean Schneider

Peel
Hunt
            Tel: 020 7418
8900

Dan Webster

Finn Nugent

About Marston's

Marston's is a leading pub operator with an estate of c.1,370 pubs nationally,
comprising managed, partnership ('franchised') and tenanted and leased pubs.
Marston's employs c.10,000 people.

About CMBC

CMBC is one of the UK's largest brewers and the leading UK brewer of cask ale.
With a brewery and logistics network covering the whole of the UK, CMBC is a
home of brewing expertise, defined by the combined 300 years of heritage in
beer and strong values.

The portfolio spans World Beer brands, premium lager and beloved ales,
including iconic names, Carlsberg Danish Pilsner and 1664, alongside cask
favourites like Hobgoblin and Wainwright and rising stars, 1664 Blanc, Poretti
and Brooklyn Craft beers.

With an enviable selection of low and no alcohol options such as Carlsberg
0.0, Brooklyn Special Effects and Erdinger Alkoholfrei, CMBC champions
exceptional brews that are exciting drinkers everywhere, whatever their taste.

Additional information

Sources of financial information

Unless otherwise stated, all financial information relating to Marston's
(including Marston's share of CMBC) disclosed in this announcement (including
the Appendices) has been extracted, without material adjustment, from
Marston's 2023 and 2022 published audited annual report and accounts and
published unaudited HY 2024 interim results.

Endnotes:

 1  References to the "Group" or the "Marston's Group" mean Marston's PLC (or
the "Company"), its subsidiaries, as defined in the Companies Act 2006, and
its subsidiary undertakings from time to time.

 2  (#_ednref2) Enterprise value calculated based on cash consideration of
£206 million plus Marston's 40% share of CMBC's unaudited pre-IFRS 16 net
debt as of 31 December 2023 of £72.5 million, as per CMBC's internal
financial accounting records as reported to Marston's (extracted without
material adjustment).

 3  (#_ednref3) Marston's 40% share of CMBC's unaudited pre-IFRS 16 underlying
EBITDA for the 12 months ending 31 December 2023 of £40.5 million, calculated
from CMBC's internal financial accounting records as reported to Marston's
(extracted without material adjustment).

 4  (#_ednref4) Marston's 40% share of CMBC's unaudited pre-IFRS 16 underlying
EBIT for the 12 months ending 31 December 2023 of £24.2 million, calculated
from CMBC's internal financial accounting records as reported to Marston's
(extracted without material adjustment).

 5  (#_ednref5) Net proceeds of c.£202 million after estimated fees and
restructuring costs of c.£4 million (excludes costs of Class 1 circular).

 6  (#_ednref6) Net debt (excluding IFRS 16 leases) of £1,160.9 million
extracted from Marston's published unaudited HY 2024 interim accounts, without
material adjustments, minus net proceeds of c.£202 million.

 7  (#_ednref7) Proceeds include the upfront payment of £239 million (£273
million less the £34 million contingent payment) as per the announcement on
22 May 2020 and the contingent payment of £28 million received as per
Marston's published audited 2022 annual report and accounts.

 8  (#_ednref8) As per publicly announced valuation of £580 million, net of
the £6 million lower contingent payment which is the difference between the
£34 million announced contingent payment on 22 May 2020 and the £28 million
received as per Marston's published audited 2022 annual report and accounts,
and EBITDA of £44.6 million on 22 May 2020.

 9  (#_ednref9) Includes dividend received from CMBC as disclosed in Marston's
published audited 2023 annual report and accounts. As well as the dividend
received from CMBC as disclosed in Marston's published unaudited HY 2024
interim results.

 10  (#_ednref10) Underlying income of (£0.6 million) for 6 months to 30
March 2024. Statutory income was (£16.6 million) for the period.

APPENDIX I

MATERIAL CONTRACTS

1.                     The Group

 

1.1.                  Transaction Agreements

 

(A)        Share purchase agreement

Parties and structure

The Disposal is governed by the share purchase agreement ("Share Purchase
Agreement") entered into between Marston's, Marston's Trading Limited ("MTL"),
Carlsberg UK Holdings Limited ("CUKH"), Carlsberg Breweries A/S and CMBC (the
"Parties"). Pursuant to the Share Purchase Agreement, subject to the
Shareholder Approval Condition, MTL has agreed to sell and CUKH has agreed to
purchase 64 ordinary shares of £1 each in the capital of CMBC (representing
MTL's entire shareholding in CMBC, being 40% of the issued share capital of
CMBC) (the "Sale Shares"). Following completion under the Share Purchase
Agreement, CMBC will become a wholly owned subsidiary of CUKH.

Condition

As the Transaction constitutes a Class 1 transaction for Marston's under the
current UK Listing Rules, completion of the sale and purchase of the Sale
Shares pursuant to the terms of the Share Purchase Agreement is conditional on
the Shareholder Approval Condition. The Transaction is not subject to any
other conditions. If the Shareholder Approval Condition is not satisfied or
waived before 15 December 2024 (being the "Long Stop Date"), then the Share
Purchase Agreement shall terminate. Pursuant to the Share Purchase Agreement
(and as further described in the above section "Sale of CMBC transaction
summary"), the Shareholder Approval Condition may be waived by MTL at its sole
discretion to take account of the fact that the UK Listing Rules are expected
to change in the summer of 2024 in a manner that would mean the Shareholder
Approval Condition is no longer required for a Class 1 transaction.

Waiver

In addition (also as further described in the above section "Sale of CMBC
transaction summary"), Marston's has granted the Waiver to Carlsberg and CUKH
pursuant to the Share Purchase Agreement in connection with the Carlsberg
Transaction. The Waiver is limited to the Carlsberg Transaction only, and will
immediately cease to have effect if the Carlsberg Transaction does not
complete by 1 August 2025 or is completed for a total enterprise value of less
than £1,000 million. The Waiver is not conditional on completion under the
Share Purchase Agreement.

SHA

The Parties have agreed that the SHA will terminate subject to, and
conditional upon, completion under the Share Purchase Agreement.

Consideration

The consideration payable by CUKH for the Sale Shares at completion is £206
million in cash (the "Consideration"). The Consideration is not subject to any
value adjustment mechanism.

Warranties and Indemnities

MTL has given limited customary fundamental warranties relating to its title
to the Sale Shares, each of which shall be repeated at completion of the Share
Purchase Agreement. All Parties have also given customary limited fundamental
warranties relating to capacity and solvency.

CUKH has agreed to indemnify the Group for any losses suffered or incurred in
respect of the Carlsberg UK Limited Pension Scheme (or any member of such
scheme) for a period of six years from completion under the Share Purchase
Agreement (the "Pensions Indemnity").

Guarantees

Marston's has agreed to guarantee all of MTL's obligations, commitments and
undertakings arising under or in connection with the Share Purchase Agreement.
In addition, Carlsberg Breweries A/S has agreed to guarantee all of CUKH's
obligations, commitments and undertakings arising under or in connection with
the Share Purchase Agreement (including the Pensions Indemnity).

Governing law and jurisdiction

The Share Purchase Agreement is governed by English law. The English courts
will have exclusive jurisdiction to settle any dispute arising out of or in
connection with the agreement.

(B)        Deed of Amendment in relation to the Supply Distribution
Agreement

Parties and structure

CMBC and MTL entered into the SDA on the date of completion of the joint
venture (30 October 2020) for a term of up to 20 years (as amended by a
consumables termination notice entered into by CMBC and MTL on 24 June 2022).
The SDA governs the terms for the supply and distribution by CMBC of drinks
products and related services to MTL. It is intended that the SDA will remain
in place on substantially the same terms subject to the key amendments set out
below. In order to reflect the end of the joint venture between MTL and CUKH
and the termination of the SHA, CMBC and MTL have agreed to amend the SDA
pursuant to a deed of amendment (the "SDA Deed of Amendment"), that will be
entered into and become effective at completion of the Share Purchase
Agreement.

The SDA Deed of Amendment provides for a non-material amendment to a customer
KPI, and the inclusion in the SDA of certain termination rights that are
otherwise included in the SHA (that will terminate on completion of the Share
Purchase Agreement) to be granted to both parties to the SDA. In respect of
termination following a change of control of either party, the other party can
terminate the SDA provided that such rights must be exercised within six
months of the relevant change of control taking place in order to be effective
and termination will take effect within a set period of time after the
relevant termination notice is served (such period of time to vary depending
on the identity of the new controller). The SDA Deed of Amendment also
provides for CMBC to have an immediate termination right under the SDA (in
line with exit rights otherwise included in the SHA) if certain customer
targets are not met by MTL within an agreed tolerance.

Following service of any such termination notices, (or following termination
or expiry of the SDA in any other circumstance) CMBC is obliged to support MTL
with the transition to an alternative logistics supplier.

1.2.                  Marston's Licence Agreement

Marston's and CMBC entered into the Marston's licence agreement on the date of
completion of the joint venture (30 October 2020) (the "Marston's Licence
Agreement"). The Marston's Licence Agreement ensures that CMBC perpetually
licenses to Marston's (subject to some limited termination rights) certain
intellectual property which was contributed to CMBC by the Group in connection
with the original joint venture for the purposes set out below.

Under the Marston's Licence Agreement, CMBC licenses to Marston's on a
royalty-free, worldwide basis: (i) certain word and device marks relating to
the "Marston's" name, including the "Marston's" and "Marston's Brewery" trade
marks and the "three barrels" device mark, for use in connection with the
operation of a hospitality, telecommunications and/or property development
business; and (ii) certain other trade marks contributed to CMBC, primarily
the beer brands "Jennings" and "Banks's", for use in connection with the
operation of a hospitality business.

This licence from CMBC to Marston's is exclusive in the fields set out at (i)
and (ii) above, such that only the Group can use the licensed trade marks
within those exclusive fields. Although the Group no longer exercises direct
control over the "Marston's" name, CMBC is required, pursuant to the Marston's
Licence Agreement, to maintain and prosecute the licensed marks (including
"Marston's") at Marston's cost.

The Marston's Licence Agreement shall continue in full force and effect
notwithstanding the Transaction.

1.3.                  Private Placement

In November 2019, the Company issued £40 million of privately placed debt
(the "Private Placement") which sits pari passu with Marston's bank lending.
There is a fixed rate of interest paid quarterly over the term of the Private
Placement, with a bullet repayment on maturity. On 30 March 2023, Marston's
successfully secured an amendment and extension to the Private Placement to
the end of January 2025.

1.4.                  Banking facilities

Marston's has access to certain banking facilities. On 13 May 2024, Marston's
successfully secured an amendment and extension to its existing banking
facility, which was due to expire in January 2025. The revised £340 million
of funding comprises a £300 million bank facility, maturing in July 2026, and
an additional £40 million bank facility with a maturity of up to July 2026,
drawings of which must be used to repay the Private Placement.

2.                     CMBC

Save for: (i) the Share Purchase Agreement; (ii) the SDA (as shall be amended
by the SDA Deed of Amendment); and (iii) the Marston's Licence Agreement, each
as more particularly described above, no contracts have been entered into
(other than contracts entered into in the ordinary course of business) by
CMBC, either: (i) within the two years immediately preceding the date of this
announcement which are or may be material to CMBC; or (ii) at any time, which
contain any provision under which CMBC has any obligation or entitlement which
is or may be material to CMBC as at the date of this announcement.

 

APPENDIX II

RISK FACTORS

Shareholders of Marston's ("Shareholders") should carefully consider, together
with all other information contained in this announcement, the specific
factors and risks described below.

The Company considers these to be the known material risk factors relating to
the Transaction for Shareholders to consider. There may be other risks of
which the Board is not aware or which it believes to be immaterial which may,
in the future, be connected to the Transaction and have a material and adverse
effect on the business, financial condition, results of operations or future
prospects of the Group.

The risks described below are only those which: (i) are material risk factors
relating to the Transaction; (ii) will be material new risk factors to the
Group as a result of the Transaction; or (iii) are existing material risk
factors to the Group which will be impacted by the Transaction. Note that the
risk factors are set out in order of materiality within each section.

1.         Material risk factors to the Transaction

1.1.      The Transaction not coming into effect

Pursuant to the Share Purchase Agreement, completion of the Transaction is
conditional upon the Shareholder Approval Condition. The Shareholder Approval
Condition may be waived by MTL acting in its sole discretion, to take account
of the fact that the UK Listing Rules are expected to change in the summer of
2024 in a manner that would mean the Shareholder Approval Condition is no
longer required for Class 1 transactions. If the UK Listing Rules are amended
within an appropriately short time frame, the directors propose to waive the
Shareholder Approval Condition. If the UK Listing Rules are not amended within
an appropriately short time frame, the directors would seek shareholder
approval for the Transaction.

There can be no assurance that the Shareholder Approval Condition will be
satisfied or waived and accordingly, that completion will take place. If the
Transaction does not complete in accordance with the terms of the Share
Purchase Agreement, any of the risks and uncertainties set out in sections
1.2-1.3 of this Appendix II (Risk Factors) may adversely affect the Group's
business and results.

1.2.      Inability to realise shareholder value

The Board believes that the Transaction is in the best interests of the Group
and of its Shareholders as a whole, and that it currently provides the best
opportunity to realise an attractive and certain value for Marston's interest
in CMBC. If, therefore, the Shareholder Approval Condition is not satisfied or
waived as applicable and the Transaction does not complete, the Company will
not receive the cash proceeds from the disposal of its 40% interest in CMBC
(the "Disposal") and will forgo the other anticipated benefits of the
Transaction as described in this announcement.

In particular, the Board intends to use the net proceeds of the Transaction to
de-leverage, including paying down the Private Placement and banking
facilities. Following these actions, Marston's expects that: (i) the Marston's
Group's overall interest expense would reduce by c.£18 million vs. the
Board's current expectations; and (ii) it would accelerate the attainment of
its 2026 net debt target of <£1 billion. If the Shareholder Approval
Condition is not satisfied or waived as applicable, the Transaction will not
complete, and these benefits will not be realised, with Marston's remaining
less financially flexible.

1.3.      Potentially disruptive effect on the Group and CMBC

If the Transaction does not come into effect, this may lead to management and
employee distraction due to perceived uncertainty as regards the future of
Marston's interest in CMBC, and the future of CMBC more generally. Both the
Group and the Carlsberg group have committed significant time and resources to
the Transaction. As a result, other business opportunities may have been
missed or insufficiently executed which may not be rectifiable if the
Transaction does not come into effect. In addition, the media could portray
the non-completion of the Transaction as a strategic failure of the Group
which could erode confidence among investors and stakeholders.

Further, in circumstances where Marston's has subsequently attempted to exit
the joint venture unsuccessfully, investors and stakeholders might conclude
that Marston's continued interest in CMBC is unsustainable. This uncertainty
as to Marston's commitment to the joint venture and the future of its interest
in CMBC (and CMBC more generally) might lead suppliers and customers of CMBC
to feel it is not in their commercial interests to continue to do business
with CMBC. This uncertainty might also lead to the departure of certain
members of staff of CMBC or a drop in performance levels of such members of
staff, which may have an effect on the ability of CMBC to adapt and innovate
to meet future commercial challenges.

The failure to implement the Transaction may therefore have an adverse effect
on the performance of CMBC and its value to the Group (including a likely
impairment of its investment in CMBC), and may also adversely affect Marston's
share price.

2.         Material new risk factors to the Group as a result of the
Transaction

2.1.      Financial risks for the Group in relation to its exit from the
joint venture alongside Carlsberg

The Marston's Group will forgo future returns from the joint venture, to the
extent such returns were available and this may adversely affect the Group's
business and its results. As set out in the above section "Key financial
information of CMBC", underlying income received from CMBC was £9.9 million
for the financial year ended 30 September 2023. Dividends received from CMBC
totalled £21.6 million for the financial year ended 30 September 2023. The
declaration and payment of any dividend is always dependent on the directors'
assessment of the profits that the joint venture has available for
distribution to its shareholders at the relevant time.

2.2.      The Group's operations will be less diversified and more
susceptible to specific risks

Following the Transaction, the Group's business will be less diversified, and
its overall financial performance will be dependent on the retained pub
business alone. Risks impacting the pub sector more generally or specific
issues arising in the retained pub and accommodation business will accordingly
have a proportionately greater adverse impact on the financial condition of
the Group, and have the potential to create a greater risk of share price
volatility following the Transaction.

2.3.      Waiver of certain rights under the SHA

As further described in the above section "Sale of CMBC transaction summary",
Marston's has granted the Waiver to Carlsberg and CUKH pursuant to the Share
Purchase Agreement in connection with the Carlsberg Transaction. The Waiver is
effective on signing of the Share Purchase Agreement and is not conditional on
completion, and so even if the Transaction does not complete (because, for
example, the Shareholder Approval Condition is not satisfied or waived),
Carlsberg will still be permitted under the terms of the Waiver, to pursue the
Carlsberg Transaction for a specified period of time. There is therefore a
risk that Carlsberg may acquire Britvic plc whilst Marston's remains a joint
venture partner in CMBC, which may result in reduced commitment and resources
from Carlsberg in the success of the joint venture and/or undermine customer
or supplier confidence in the joint venture. The Waiver is limited in time and
specific to the Carlsberg Transaction.

2.4.      Termination of the SHA and amendments to the SDA

The SHA will terminate on completion of the Transaction. The SDA will continue
on substantially the same terms, save that it will be amended to include
certain termination events that were previously in the SHA (as further
described in paragraph 1.1(B) of Appendix I (Material Contracts)). In
particular, the SDA (as amended by the SDA Deed of Amendment) can be
terminated by one party if the other party suffers a change of control event.
If the Transaction proceeds, the SDA (as amended) will therefore include
certain additional termination events which it did not previously contain.

3.         Existing material risk factors to the Group which will be
impacted by the Transaction

3.1.      Carlsberg UK Limited Pension Scheme liabilities

Carlsberg's UK defined benefit pension scheme, the Carlsberg UK Limited
Pension Scheme (the "Carlsberg Scheme"), falls within the joint venture
perimeter.

The most recent full actuarial valuation of the Carlsberg Scheme was carried
out as at 5 April 2022. As at that date, the Carlsberg Scheme had assets with
an estimated market value of £658 million and liabilities with an estimated
value of £719 million (valued using ongoing technical provisions basis
assumptions agreed with the scheme's trustee as part of the valuation). An
estimated update as at 31 December 2023 indicated assets valued at £462
million and liabilities of £499 million. The next full valuation is due as at
5 April 2025.

Under the UK pension scheme funding regime, two Carlsberg entities which were
contributed to CMBC (Carlsberg UK Limited and Carlsberg Supply Company UK
Limited) have primary liability for funding the Carlsberg Scheme. However, all
companies within the Group are also technically within the scope of certain
powers of the UK Pensions Regulator should the Pensions Regulator exercise its
powers in relation to the Carlsberg Scheme, and will remain so notwithstanding
completion of the Transaction. There is therefore an ongoing risk that
companies in the Group may incur liabilities in respect of the Carlsberg
Scheme in the future.

The Share Purchase Agreement provides for Carlsberg to indemnify the companies
in the Group against any amounts required to be paid to the Carlsberg Scheme
for a period of six years from completion of the Transaction. The Board is
satisfied that this indemnity is appropriate in the context of the
Transaction, and that it adequately retains the protections made available to
the Marston's Group under the SHA in respect of the aforementioned risk.

 

APPENDIX III

SIGNIFICANT CHANGE IN THE ISSUER'S FINANCIAL POSITION

1.         The Group

There has been no significant change in the financial performance or financial
position of the Group since 30 March 2024, being the end of the last financial
period for which financial information of the Group has been published.

2.         CMBC

Apart from the announcement regarding San Miguel as set out in this
announcement, there has been no significant change in the financial
performance or financial position of CMBC since 30 March 2024, being the end
of the last financial period for which financial information of CMBC has been
published. 11  (#_edn11)

 

APPENDIX IV

LEGAL AND ARBITRATION PROCEEDINGS

1.         The Group

There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which Marston's is aware)
during a period covering the 12 months prior to the date of this announcement
which may have, or have had in the recent past, a significant effect on
Marston's and/or the Group's financial position or profitability.

2.         CMBC

There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which CMBC is aware)
during a period covering the 12 months prior to the date of this announcement
which may have, or have had in the recent past, a significant effect on CMBC
and/or CMBC's financial position or profitability.

 

APPENDIX V

RELATED PARTY TRANSACTIONS

1.         Related party transactions

Save as disclosed in: (i) note 12 on page 22 of the HY 2024 Results; (ii) note
12 on pages 124 and 125 of the 2023 Annual Report; and (iii) note 12 on page
136 of the 2022 Annual Report, the Company has not entered into any related
party transactions (within the meaning ascribed to that term in UK-adopted
international accounting standards) during any of the financial years ended 1
October 2022, 30 September 2023 and otherwise up to the date of this
announcement.

 

IMPORTANT NOTICES

No statement in this announcement is intended as a profit forecast and no
statement in this announcement should be interpreted to mean that the future
earnings per share, profits, margins or cash flows of Marston's following the
Transaction will necessarily match or be greater than the historical published
earnings per share, profits, margins or cash flows of Marston's.

 

This announcement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements may be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "plans", "projects", "anticipates", "expects",
"intends", "may", "will" or "should" or, in each case, their negative or other
variations or comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. Forward-looking statements may
and often do differ materially from actual results. Any forward-looking
statements reflect Marston's current view with respect to future events and
are subject to risks relating to future events and other risks, uncertainties
and assumptions relating to Marston's business, results of operations,
financial position, liquidity, prospects, growth and strategies.
Forward-looking statements speak only as of the date they are made.

 

You are advised to read this announcement in its entirety for a further
discussion of the factors that could affect Marston's future performance. In
light of these risks, uncertainties and assumptions, the events described in
the forward-looking statements in this announcement may not occur.

 

This announcement does not constitute and should not be construed as, an offer
to purchase or sell or issue securities, or otherwise constitute an
inducement, invitation, commitment, solicitation or recommendation to any
person to purchase, subscribe for, or otherwise acquire securities in
Marston's, or constitute an inducement to enter into any investment activity
in any jurisdiction. Nothing contained in this announcement is intended to,
nor shall it, form the basis of, or be relied on in connection with, any
contract or commitment whatsoever and, in particular, must not be used in
making any investment decision.

 

The distribution of this announcement in or from certain jurisdictions may be
restricted or prohibited by the laws of any jurisdiction other than the UK.
Recipients of this announcement are required to inform themselves of, and
comply with, all restrictions or prohibitions in such other jurisdictions. Any
failure to comply with applicable requirements may constitute a violation of
the laws and/or regulations of such other jurisdictions.

 

This announcement has been prepared for the purposes of complying with the
applicable law and regulation of the UK (including the UK Listing Rules and
the Disclosure Guidance and Transparency 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 the laws and regulations of
any jurisdiction outside of the UK.

 

Save as required by the Market Abuse Regulation, the Disclosure Guidance and
Transparency Rules, the UK Listing Rules or by applicable law, each of
Marston's and J.P. Morgan Cazenove expressly disclaim any intention,
obligation or undertaking to update, review or revise any of the information
or the conclusions contained herein, including forward-looking or other
statements contained in this announcement, or to correct any inaccuracies
which may become apparent whether as a result of new information, future
developments or otherwise.

(#_ednref1)

 11  (#_ednref11) This refers to the HY 2024 interim results published by
Marston's, which includes financial information of CMBC.

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