Stonegate is set to acquire fellow pub company Ei Group as the two agree terms which would see the latter's shares bought out for approximately £1.27b.
Stonegate said that "with greater scale and diversification… the combined group will be better positioned to compete effectively in what is expected to be a challenging operating environment for the foreseeable future". The acquisition is expected to complete in the first quarter of 2020.
Robert Walker, chairman of Ei Group, said: "In 2015 we set out a new strategy. During the past four years we have made great progress in its execution and have delivered a significant increase in value for our shareholders. The management team have done an outstanding job and the acquisition, at a significant premium, is only possible because of the work that they have done and what has been achieved. The acquisition delivers the future value of the strategy for our shareholders and secures an exciting future for our tenants and employees by creating the leading managed and tenanted pub company in the industry."
"The commercial benefits of combining the companies are compelling. Stonegate is committed to continuing to invest in the business for the future benefit of the combined business, tenants and employees. The EIG board believes that this is a combination it can recommend with confidence to shareholders and stakeholders alike."
Ian Payne, chairman of Stonegate, added: "It is an exciting prospect to bring EIG and Stonegate together to create a diversified pubs group with significant industry expertise… We plan to leverage our existing managed house infrastructure, portfolio of formats and access to capital and invest in the combined estate for the benefit of all stakeholders."
Ei Group is the largest owner of pubs in the UK with over 4,000 properties across England and Wales, while managed pub company Stonegate has more than 765 operating outlets.
Stonegate began trading in November 2010 following its acquisition of 333 pubs from Mitchells & Butlers and has since grown through a series of strategic acquisitions, including the 33-strong Be At One portfolio for a reported £50m in July 2018.