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Orchid purchase extends M&B's portfolio

MITCHELLS & Butlers, the managed pub giant behind the All Bar One, Harvester and O'Neill's brands, has acquired the 173-strong Orchid Group for £266 million.

M&Bs, which manages about 1,600 pubs in the UK, said the deal is in line with its strategy of building its share of the branded pub and restaurant market.

It hopes to boost sales at the Orchid outlets by investing £35 million to convert 96 outlets to its own brands over the next two years.

While its own outlets generate average sales of £22,700, M&Bs said the average at Orchid is £15,300.

M&Bs also expects the deal, paid for in cash, will bring cost savings of about £6 million by rationalising support functions and combining buying power.

Orchid, which has been owned by Deutsche Bank since 2012, has 15 outlets in Scotland trading under different brands.

The bulk of Orchid's 158 outlets are freehold owned or held on long leaseholds.

A spokeswoman for M&Bs said 77 of the acquired units will be transferred to the company's Heartland portfolio and remain with their current brand.

This is either because they are trading profitably or have recently received significant investment from Orchid.

The spokeswoman added that Orchid will retain the ownership of 49 outlets, which M&Bs will manage for a 15-month spell.

The deal includes the Orchid head office in St Albans. It is unclear whether any of Orchid's senior management team will take on roles with M&Bs.

Alistair Darby, chief executive of M&Bs, said: "The acquisition of the majority of the Orchid estate will accelerate Mitchells & Butlers' growth and present significant opportunities for value creation through cost savings, synergies and the conversion of Orchid pubs to Mitchells & Butlers brands.

"We greatly look forward to welcoming the Orchid employees who will transfer to Mitchells & Butlers as a consequence of this acquisition."

Shares in M&Bs closed down 4.8p at 402.5p.

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