Britain’s largest pub operator is preparing £1 billion sell-off of more than 1,000 venues

Stonegate Group, owner of the Slug & Lettuce and Be At One chains, has opened preliminary talks with advisers about a disposal of part of its estate, according to industry sources.

The move comes as the company struggles with more than £3 billion of debt built up largely through its £3 billion takeover of rival Ei in 2019.

The pubs under review — 1,034 sites internally known as Stonegate’s “platinum” collection — are regarded as among the company’s strongest assets. Sources said the package could fetch up to £1 billion. Stonegate attempted to offload a similar number of pubs in 2023, but the sale did not progress.

After that failed process, Stonegate securitised the platinum estate using a £638 million loan from private equity firm Apollo, carving the pubs out into a separate entity and easing immediate pressure on the wider group.

The company’s executives are reassessing options ahead of January, when a “non-call period” on the Apollo loan — which currently prevents Stonegate from selling or refinancing the pubs — expires. One option being considered is breaking the estate into several large tranches rather than seeking a single buyer.

Stonegate, owned by private equity firm TDR Capital, has grown rapidly since its creation in 2010, when TDR bought 333 pubs from Mitchells & Butlers. Its takeover of Ei made it the country’s biggest pub landlord, overtaking Greene King, but also saddled the business with heavy borrowing shortly before the Covid pandemic forced pubs to shut for months.

The financial strain has only intensified since. High interest rates and rising operating costs have weighed heavily on the business: Stonegate’s finance costs hit £455 million in the year to 29 September 2024, while the group reported a £214 million loss for the year. The sector has also been hit by higher labour costs following increases in employers’ national insurance and the minimum wage.

In August, ratings agency Fitch downgraded Stonegate to CCC+, citing concerns about its ability to meet debt repayments. The carved-out platinum pubs were not included in the rating.

The platinum estate is understood to be generating around £90 million in annual EBITDA. All the pubs are freehold, spread across England and Wales.

Private equity bidders are expected to show strong interest given the scale and quality of the assets available.

Alongside efforts to stabilise its finances, Stonegate chief executive David McDowall — who joined from BrewDog last year — has launched a transformation plan aimed at returning the company to profitability. The strategy includes converting hundreds of managed pubs into tenanted or leased sites, reducing labour exposure and generating what the company says is an average profit uplift of £110,000 per pub.

TDR, Stonegate’s owner, is best known for its investment in Asda, which it acquired in a £6.8 billion deal alongside the Issa brothers in 2021. It took majority control of the supermarket last year after buying Zuber Issa’s stake.

Stonegate declined to comment on the potential sale.

Read more:
Britain’s largest pub operator is preparing £1 billion sell-off of more than 1,000 venues