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Hong Kong Billionaire Bets on a Brexit Certainty

Chris Hughes

(Bloomberg Opinion) -- The 2.7 billion-pound ($3.3 billion) offer for Greene King Plc from an investment group backed by Hong Kong billionaire Li Ka-shing is a sign one thing is certain whatever the outcome of Brexit: Brits will keep drinking beer and eating pies.

Greene King isn’t an international business pretending to be a U.K. company like Arm Holdings Plc, Inmarsat Plc, Cobham Plc or even Merlin Entertainments Plc – all of which generate most of their revenue from overseas and have received takeover offers since the referendum in 2016. The pub chain’s revenue is 100% in pounds.

Yet its attractions are plain to see. The U.K. pubs industry has shed capacity in recent years. The survivors have adapted by offering food and making pubs more family friendly. Contrast that with the casual dining industry, where pizza chains in particular have proliferated and poisoned returns. Greene King owns most of its 2,700 sites. That will provide some comfort to CK Asset Holdings Ltd., which is more accustomed to investing in solid U.K. rail, water and real estate assets.

The timing is telling. Greene King was more affordable last year when its shares hit their lowest since 2011. But back then its board might have been less amenable to a deal. Since then, the pound has continued to slide.

CK’s offer, pitched at a 51% premium to where the stock was trading just before the bid, gives investors a price they haven’t seen since the Brexit vote at a time when U.K. stocks are deeply unpopular with international money managers. That high top-up may assuage fears management rushed to back a deal that is likely to see them stay in their posts.

It may seem like a small, bullish sign for U.K. equities. The reality, though, is there are few companies that share Greene King’s characteristics.

To contact the author of this story: Chris Hughes at chughes89@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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