Stonegate Group, owner of the Slug & Lettuce and Be At One pub chains, has opened preliminary talks with advisers over a potential sale of part of its estate, according to industry sources. The move comes as the company contends with more than £3 billion of debt, largely stemming from its £3 billion takeover of rival Ei in 2019.
The pubs under consideration, internally referred to as Stonegate’s “platinum” collection, consist of 1,034 sites regarded as some of the company’s strongest assets. Sources estimate the portfolio could fetch up to £1 billion. Stonegate attempted a similar sale in 2023, but the transaction did not progress. Following that failed attempt, the company securitised the estate with a £638 million loan from private equity firm Apollo, creating a separate entity for the pubs and alleviating some pressure on the wider business.
Executives are now reviewing options ahead of January, when a “non-call period” on the Apollo loan expires. The restriction currently prevents Stonegate from selling or refinancing the pubs. One option being considered is dividing the estate into multiple tranches rather than pursuing a single buyer. Private equity interest is expected to be strong given the scale and quality of the portfolio.
Stonegate, owned by private equity firm TDR Capital, has expanded rapidly since its formation in 2010. TDR initially purchased 333 pubs from Mitchells & Butlers, and the subsequent acquisition of Ei made Stonegate the largest pub landlord in the UK, overtaking Greene King. However, the expansion left the company heavily leveraged just before the Covid-19 pandemic forced pub closures.
Financial pressures have intensified in recent years. Stonegate’s finance costs reached £455 million in the year ending 29 September 2024, and the company reported a £214 million loss. Rising labour costs, including increases in national insurance and the minimum wage, have further strained operations. In August, ratings agency Fitch downgraded Stonegate to CCC+, raising concerns about its ability to meet debt obligations. The platinum estate, which generates around £90 million in annual EBITDA, was not included in the rating. All pubs in the portfolio are freehold and spread across England and Wales.
Chief executive David McDowall, who joined from BrewDog last year, has launched a transformation plan aimed at restoring profitability. The strategy includes converting managed pubs into tenanted or leased sites, reducing labour exposure, and generating an average profit uplift of £110,000 per pub.
TDR Capital, best known for its investment in Asda alongside the Issa brothers, acquired majority control of the supermarket last year. Stonegate has declined to comment on the potential sale of its platinum estate.
The review of Stonegate’s premium pub portfolio underscores the challenges facing heavily leveraged operators in the UK hospitality sector amid rising costs and high debt servicing obligations.
