S&N buys 311 pubs for pounds 206m as Nomura starts mass sell-off

The dramatic shake-up of Britain's pub industry gathered pace yesterday as Nomura, the Japanese investment bank, kicked off a disposal programme which could see it sell at least 1,000 of its tenanted estate.

Scottish & Newcastle signalled its intention to expand rapidly its managed house estate by buying 311 pubs from Nomura, which recently became Britain's largest landlord, for pounds 206m. The pub and brewing giant, will use the new sites to roll out brands such as Rat & Parrot, Chef & Brewer and John Barras community pubs.

Brian Stewart, chairman of S&N, said: "This was a unique opportunity for us. This will enable us to accelerate our successful expansion of our managed estate. It is difficult to find new sites and we believe we have paid a fair price for good locations."

S&N will now embark on its own widescale reorganisation of its pub estate. It is likely to launch a disposal programme, selling hundreds of pubs from its tenanted estate and some of its worst performing managed houses to make room for its latest purchases.

Nomura is looking to continue its sell-off as it attempts to slim down its pub business ahead of an eventual flotation or trade sale. As part of this plan Nomura now plans to allow 300 dissident tenants the right to be freed from the "tie", a system that forces them to a buy beer through the landlord. These tenants are part of a large group of disgruntled publicans who are taking legal action against Nomura to declare unlawful a former tie which they claim forced them to buy beer an unfair prices. By freeing these pubs from tie, Nomura hopes to clear the way for their sale.

The group still faces the prospect of several key court cases this year which could pave the way for millions of pounds worth of compensation claims.

Nomura bought the pubs last September as part of a pounds 1.2bn deal to acquire the 4,300-strong Inntrepreneur and Spring Inns chains.

Of the 311 pubs sold, 70 are already managed houses or on short leases. However, 240 of the sites have tenants with long leases which S&N would have to buy out to convert them to managed houses.

S&N is paying pounds 662,000 a pub, compared to the an average of pounds 275,000 a pub Nomura paid for Spring Inns and Inntrepreneur.

S&N estimates that the total cost, including refurbishment of the sites, will rise to pounds 1m a pub.

However, analysts believe that S&N is not paying over the odds. "The price paid does not look cheap but S&N has been able to pick the best sites and in the long term should be able to make a lot of money out of them," said one analyst.

Britain's pub industry has been in turmoil in recent months with the rise of new and powerful independent operators as the big brewers continue to sell off their tenanted estates.