(Reuters) - Slug and Lettuce owner Stonegate Pub Company said on Thursday it had agreed to pay 1.27 billion pounds to buy pub operator Ei Group (L:EIGE), taking control of the company's more than 4,000 pubs and massively expanding its existing network.
Under the deal, Stonegate will offer 285 pence in cash for each Ei share, representing a premium of more than 38% over Wednesday's close.
Stonegate, which has a national estate of over 765 operating outlets, began trading in November 2010 after buying 333 pubs from Mitchells & Butlers (L:MAB). It has since grown in size and scale through a series of acquisitions.
U.K. pub operators and restaurant chains have been battling increased costs due to a minimum wage hike, higher property prices and power bills as well as a move away from pub drinking by younger Britons.
The deal values Ei, formerly known as Enterprise Inns , at 2.97 billion pounds, including debt.
Ei directors intend to unanimously recommend the offer to shareholders. They were advised by Deutsche Bank and Rothschild & Co while Barclays is acting as financial adviser to Stonegate.