Stonegate Group, owner of the Slug & Lettuce and Be At One chains, has entered preliminary discussions with advisers about selling part of its estate, according to industry sources.
The move comes as the company struggles with more than £3bn of debt, largely created by its £3bn takeover of rival Ei in 2019.
The pubs examined – 1,034 sites known internally as Stonegate’s “platinum” collection – are considered one of the company’s strongest assets. Sources say the package could raise up to £1bn. Stonegate attempted to sell a similar number of pubs in 2023 but the sale did not progress.
Following this failed trial, Stonegate securitized the platinum estate with a £638m loan from private equity firm Apollo, splitting the pubs into a separate entity and easing immediate pressure on the larger group.
Company executives are considering the options before January, when a “no-call” period on the Apollo loan – which currently prevents Stonegate from selling or refinancing the pubs – expires. One option being considered is to divide the property into several large tranches rather than seeking a single buyer.
Stonegate, owned by private equity firm TDR Capital, has grown rapidly since it was founded in 2010 when TDR bought 333 pubs from Mitchells & Butlers. The Ei takeover made it the country’s largest pub landlord, overtaking Greene King, but also saddled the company with heavy loans just before the Covid pandemic forced pubs to close for months.
The financial burden has only gotten worse since then. High interest rates and rising operating costs have weighed heavily on the business: Stonegate’s financing costs were £455m in the year to September 29, 2024, while the group reported a loss of £214m for the year. The sector was also hit by higher labor costs as a result of increases in employers’ social security and the minimum wage.
In August, ratings agency Fitch downgraded Stonegate to CCC+, citing concerns about its ability to repay debt. The platinum pubs identified were not included in the rating.
The platinum property is expected to generate annual EBITDA of around £90 million. All pubs are freehold and spread across England and Wales.
Given the scale and quality of assets available, strong interest is expected from private equity bidders.
As well as efforts to stabilize finances, Stonegate boss 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 leased or leased sites, reducing workload and delivering an average profit increase of £110,000 per pub, the company said.
TDR, the owner of Stonegate, is best known for its investment in Asda, which it acquired alongside the Issa brothers in a £6.8bn deal in 2021. Last year the company took majority control of the supermarket after buying Zuber Issa’s stake.
Stonegate declined to comment on the possible sale.
