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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

The pubs group has received a 285p cash per share bid from Stonegate

EI Group (EIG) 285p

Gain to date: 66%

Original entry point: Buy at 171p, 8 November 2018

We’re now sitting on a 66% return from Ei Group (EIG) after the pubs group agreed a takeover offer of 285p cash per share from Stonegate Pubs, a private operator of 772 pubs and bars. This gain has trounced the 5% return from the FTSE 350 over the same period.

Although the transaction is dependent upon the approval of UK and European competition authorities, the likelihood is that the deal will go through. This means that the company’s shares will be delisted in due course.

The rationale was ‘defensive’ in nature and proposed against a backdrop of a ‘challenging operating environment for the foreseeable future’. Indeed, Stonegate, owned by private equity group TDR Capital, says it will continue to execute EI Group’s existing strategy in order to benefit from the combined company’s greater scale and diversification.

The management said that Stonegate made multiple approaches earlier in the year. These were rejected because the price was not acceptable. Other shares in the sector gained on the takeover news as the price eventually agreed was at a premium valuation to other companies in the sector.

SHARES SAYS: Take profit now. For those wanting to keep exposure to the same industry, we recommend recycling the proceeds into Marstons (MARS) which we wrote about in June.


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