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RSS Fuller,Smith &Turner (FSTA) Add to Alerts list Print Mail a friend Friday 25 January, 2019 Fuller,Smith &Turner Disposal and Trading Update THIS ANNOUNCEMENT RELATES TO THE DISCLOSURE OF INFORMATION THAT QUALIFIED OR MAY HAVE QUALIFIED AS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014. FOR IMMEDIATE RELEASE 25 January 2019 Fuller, Smith & Turner P.L.C. (“Fuller’s” or the “Company”) Proposed Sale of the Fuller’s Beer Business to Asahi and Trading Update Fuller’s announces that it has entered into an agreement for the sale of its entire beer business to Asahi Europe Ltd (“AEL”), a wholly owned subsidiary of Asahi Group Holdings, Ltd (“Asahi”), for an enterprise value of £250 million on a debt free, cash free basis (the “Proposed Disposal”). The business being sold comprises the entirety of Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling, as well as the distribution thereof, and also includes the Griffin Brewery, Cornish Orchards, Dark Star Brewing and Nectar Imports (the “Fuller’s Beer Business” or the “Beer Business”). Under the terms of the Proposed Disposal, AEL will acquire the brands of the Beer Business (including “London Pride”) and will receive the benefit of a licence, on a perpetual, global, exclusive and royalty-free basis, to use certain trade marks (including the “Fuller’s” name, logo and cartouche) for the provision of beverages. Ownership of the licensed trade marks will be retained by Fuller’s. Having carefully considered its options for the Beer Business and Fuller’s existing relationship with Asahi, the Board believes that Asahi is the ideal owner of the Beer Business and will create the right environment for the Beer Business to flourish in the future and protect the Fuller’s brewing heritage. The Board welcomes the fact that Asahi also upholds Fuller’s key values of a genuine commitment to brewing excellence and has a proven track record as a long-term steward of iconic brands making them an ideal strategic partner to the Fuller’s pubs and hotels business in the future. Following Completion of the Proposed Disposal, Fuller’s will be a focused, premium pub and hotel operator pursuing its previously stated strategy of running a stylish, high quality estate, with well-located, well-invested, predominantly freehold sites that are maintained to the high standards that customers have come to expect. Fuller’s will form a strategic alliance with Asahi that will ensure continued access to the high quality premium beer brands Fuller’s has always brewed. TRANSACTION HIGHLIGHTS Sale of the Fuller’s Beer Business for an enterprise value of £250 million, representing a multiple of 23.6x EBITDA (of £10.6 million for the 52 weeks ending 31 March 2018);

The price reflects the strategic value of the brands of the Beer Business being acquired, the long-term growth potential of the Beer Business under AEL’s ownership, the value of the Griffin Brewery as well as the expertise and respected industry knowledge of the people employed within the Beer Business;

Substantial premium to the value attributable to the Company’s Shareholders if the Beer Business had remained under Fuller’s ownership;

A strategic alliance between Fuller’s and Asahi, supported by a Long-Term Supply Agreement, will allow Fuller’s to continue providing a high quality beer and cider offering to its customers;

Net cash proceeds of the Proposed Disposal are expected to be approximately £205 million at Completion, taking into account adjustments and after estimated transaction, Reorganisation and separation costs (the “ Net Cash Proceeds ”);

A return of proceeds between £55 million to £69 million of the Net Cash Proceeds is expected to be distributed to Ordinary Shareholders, representing £1.00 to £1.25 per A and C Ordinary Share and £0.10 to £0.125 per B Ordinary Share;

The Proposed Disposal is not anticipated to impact the level of dividend payments made by the Company as the Board is intending to declare a final dividend for each class of Ordinary Shares for the financial year ending 31 March 2019 of an amount at least equal to the final dividend from the prior financial year and the Board is expecting to maintain a progressive dividend policy going forward; (1)

The Proposed Disposal is conditional upon the passing of two inter-conditional ordinary resolutions approving the Proposed Disposal, completion of the Reorganisation and obtaining a relevant confirmation from the UK Competition and Markets Authority;

The Proposed Disposal is expected to complete in the first half of 2019.

This statement does not constitute a profit forecast or estimate and should not be interpreted to mean that future earnings per share, profits, margins, and/or cash flow will support such a policy. The Proposed Disposal will enable Fuller’s management to focus on its pubs and hotels, which is the core of the business and where today 87 per cent of the Fuller’s operating profits are generated (excluding unallocated costs). It will also provide significant capital to accelerate investment in the premium pubs and hotels business both organically and through future acquisitions. The focus of management will remain unchanged, to be a leading operator of stylish pubs and hotels, while driving organic growth through improved marketing and digital communications to grow sales and ensure relevance to today’s consumer, and through developing the people within the business. As a result of the Proposed Disposal, a strategic alliance will be formed to further strengthen the existing relationship between Fuller’s and Asahi, where AEL acts as a key supplier to Fuller’s pubs and hotels business. A Long-Term Supply Agreement with AEL will ensure Fuller’s will continue to provide the comprehensive high quality beer and cider offering its customers have come to expect. The Board welcomes this strategic alliance with Asahi, a leading global brewer, and envisage that the Proposed Disposal will enhance the ability of management to successfully grow the Fuller’s pubs and hotels business going forward. In addition to the expected return of proceeds to Ordinary Shareholders, the Board also intends to use some of the Net Cash Proceeds to make a contribution to the Pension Scheme. The remaining funds will be used to grow and further develop Fuller’s pubs and hotels business. Under the terms of the Proposed Disposal, all responsibilities relating to the Pension Scheme would be retained by Fuller’s. The Proposed Disposal constitutes a Class 1 transaction under the Listing Rules. Completion is conditional upon, amongst other things, the passing of two inter-conditional ordinary resolutions approving the Proposed Disposal by (i) the A, B and C Ordinary Shareholders (the “Ordinary Shareholder Resolution”) and (ii) the A Ordinary Shareholders (the “A Ordinary Shareholder Resolution”) (together, the “Resolutions”). Accordingly, a circular containing full details of the Proposed Disposal, the Resolutions and eligibility to vote on the Resolutions, the Board’s recommendation and irrevocable undertakings to vote in favour of the Resolutions, and the notice convening an Extraordinary General Meeting at which such approval for the Resolutions will be sought, will be published in due course. The Company has received irrevocable undertakings from the Directors and certain other Ordinary Shareholders to vote at the Extraordinary General Meeting in favour of the Resolutions in amounts representing (in aggregate): (i) in respect of the A, B and C Ordinary Shareholder Resolution, approximately 28.19 per cent. of the total issued Ordinary Shares of Fuller's as at 24 January 2019 (being the latest practicable date prior to publication of this announcement); and (ii) in respect of the A Ordinary Shareholder Resolution, approximately 5.62 per cent. of the total issued A Ordinary Shares of Fuller's as at 24 January 2019 (being the latest practicable date prior to the publication of this announcement). Simon Emeny, Chief Executive of Fuller’s, commented: “This deal secures the future of both parts of our business including protecting the heritage of the Griffin Brewery in Chiswick, which was particularly important to the Fuller’s Board. We remain incredibly proud of the Fuller’s Beer Business, its history and the high quality premium beer and cider portfolio that we have developed. Brewing has formed an integral part of our history and brand identity, however the core of Fuller’s and the driver of our future growth is now our premium pubs and hotels business.” “I am delighted that this transaction maintains Fuller’s long association with the Beer Business and that we will continue to enjoy a strong relationship with Asahi as a key supplier. We look forward to continuing our alliance and developing a mutually beneficial partnership that will see both businesses flourish in the future. Asahi, as a company recognised for brewing excellence, is an appropriate custodian of our rich brewing history and the Griffin Brewery, and will ensure the Fuller’s Beer Business brands will reach an even wider global audience.” Akiyoshi Koji, CEO of Asahi Group Holdings, Ltd, commented: “We have long admired the brewing business and exceptional beer brands that Fuller’s has built over the years and the high degree of respect it commands throughout the global beer industry. Fuller’s is one of the few brewers that show the same genuine commitment to brewing excellence and quality that we do. We strongly believe that the brands of the Beer Business, including London Pride, Frontier and Cornish Orchards among others, complement our premium portfolio in the UK market. In particular, London Pride is a fantastic brand with an illustrious heritage dating back to the 1950s and we are excited about its untapped international potential which Asahi has the scale and global network to unlock.” Rothschild & Co is acting as sponsor and sole financial advisor to Fuller’s on the Proposed Disposal. There will be a conference call for sellside analysts and investors at 0800 hours (GMT) today. Please contact Tom Berger at Instinctif Partners on 020 7457 2834 or [email protected] for dial-in details. An accompanying slide presentation to the conference call will be available from 0750hours (GMT) at: www.fullers.co.uk/corporate/investors/financial-reports TRADING UPDATE The Company also announces today its trading update for the 42 weeks to 19 January 2019. The Company has delivered a very strong performance since it last reported, especially in its Managed Pubs and Hotels where like for like sales have risen 5.6 per cent in the last 10 weeks. For the 42 week period, like for like sales in Managed Pubs and Hotels have risen 4.7 per cent, like for like profits in Tenanted Inns have risen 2 per cent and total beer and cider volumes in The Fuller’s Beer Company have remained level. Simon Emeny, Chief Executive, said: “This is a very good set of figures and I’m particularly pleased with the way our Managed Pubs and Hotels performed over the important five week Christmas and New Year trading period. Like for like sales for December rose 8.7 per cent and our pre-booked covers rose by 16 per cent. “Since we last reported, we have opened our latest transport hub site, The Signal Box at Euston, which is proving very popular and have refurbished The Blackbird at Earl’s Court, including developing nine new boutique bedrooms. We are on site at The Hercules in Lambeth, which will open before the year end, and in the next few weeks we will open 15 stylish new bedrooms at The Counting House in Cornhill, a large freehold site in the heart of the City of London. We have also transferred another six tenancies to our turnover agreement. “As has been widely commented, we are in an uncertain and challenging consumer environment. However, Fuller’s has well-invested premium pubs and an excellent team of people, underpinned by a long-term vision and a clear, well-executed strategy that is proven to grow sales, attract new customers and deliver returns for our Shareholders. “We will next update the market on 7 June 2019, when we announce the Company’s full year results for the 52 weeks to 30 March 2019.” Enquiries Fuller, Smith & Turner P.L.C. 020 8996 2000 Simon Emeny, Chief Executive Georgina Wald, Corporate Communications Manager 020 8996 2198 Instinctif Partners (Press Relations Adviser to Fuller’s) 020 7457 2020 Justine Warren Rothschild & Co (Financial Adviser and Sponsor to Fuller’s) 020 7280 5000 Akeel Sachak Jonathan Dale Asahi Europe Ltd Hector Gorosabel, Chief Executive Officer Monika Agocs, Group Corporate Affairs Director [email protected] Important information relating to financial advisers N. M. Rothschild & Sons Limited (“Rothschild & Co”), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Fuller's and for no one else in connection with the matters described in this announcement and is not, and will not be, responsible to anyone other than Fuller's for providing the protections afforded to its clients nor for providing advice in relation to the Proposed Disposal, the contents of this announcement or any transaction, arrangement or other matter referred to in this announcement. Cautionary statement This announcement is not intended to, and does not constitute, or form part of, any offer to sell or an invitation to purchase or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction. Fuller’s Ordinary Shareholders are advised to carefully read the circular in relation to the Proposed Disposal once it has been despatched. Any response to the Proposed Disposal should be made only on the basis of the information in the circular to follow. Forward-looking statements This announcement contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. All statements other than statements of historical fact are forward-looking statements. They are based on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of a date in the future or forward-looking words such as "plans", "expects", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes", "targets", "aims", "projects" or words or terms of similar substance or the negative of those terms, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations or events that are beyond Fuller's control. Forward-looking statements include statements regarding the intentions, beliefs or current expectations of Fuller’s concerning, without limitation: (i) future capital expenditure, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the Fuller’s operations; and (iii) the effects of global economic conditions on the Fuller's business. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors may cause the actual results, performance or achievements of Fuller’s to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause the actual results, performance or achievements of Fuller’s to differ materially from the expectations of Fuller’s include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and other regulation (including licensing) and policy, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, interest rates and currency fluctuations, changes in its business strategy, the outcome of any litigation, the impact of any acquisitions or similar transactions, information technology system and technology failures, political and economic uncertainty and other factors. Such forward-looking statements should therefore be construed in light of such factors. Neither Fuller’s nor any of its directors, officers or advisers provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Forward-looking statements contained in this announcement apply only as at the date of this announcement. Other than in accordance with its legal or regulatory obligations (including under the Listing Rules and the Disclosure Guidance and Transparency Rules), Fuller’s is not under any obligation and Fuller’s expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with the Listing Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with laws and regulations of any jurisdiction outside of England. INTRODUCTION The Company announces that it has entered into an agreement under which AEL will acquire the Fuller’s Beer Business for an enterprise value of £250 million on a debt free, cash free basis (the “Consideration”). The Retained Group will be a focused premium pub and hotel company comprising the existing Fuller’s pubs and hotels business. The £250 million Consideration implies a multiple of 23.6x EBITDA (of £10.6 million for the 52 weeks ending 31 March 2018). The Consideration is payable in full and in cash on the date of Completion, subject to customary adjustments based on the amount of working capital, debt and cash in the Beer Business at Completion. The Proposed Disposal will be effected through the sale of the entire issued share capital of The Fuller’s Beer Company Ltd (which has recently been incorporated to acquire certain assets and liabilities of the Fuller's Beer Business), Cornish Orchards, Dark Star Brewing and Nectar Imports. In view of its size, the Proposed Disposal constitutes a Class 1 transaction under the Listing Rules. Completion is conditional upon, amongst other things, the passing of the Resolutions. Accordingly, a circular containing full details of the Proposed Disposal, the Resolutions and eligibility to vote on the Resolutions, the Board’s recommendation, irrevocable undertakings to vote in favour of the Resolutions, and the notice convening an Extraordinary General Meeting at which such approval for the Resolutions will be sought, will be published in due course. BACKGROUND TO AND REASONS FOR THE PROPOSED DISPOSAL The Beer Business has been an important part of the Fuller’s history and brand identity and its premium beers and ciders are a key part of what differentiates Fuller’s from its competitors. However, the Board believes that the core of Fuller’s today, and the driver of future growth, is the Fuller’s pubs and hotels business. In the 52 weeks to 31 March 2018, the Fuller’s pubs and hotels business accounted for 75 per cent of external revenues, 87 per cent of operating profit (excluding unallocated costs) and has grown at 6 per cent p.a (based on revenues from £269.9 million for the 52 weeks ending 26 March 2016 to £301.4 million for the 52 weeks ending 31 March 2018). The Proposed Disposal will allow Fuller’s management to focus solely on the core of the business and it will provide significant capital to accelerate investment in the premium pubs and hotels business both organically and through future acquisitions. The focus of management will remain on driving organic growth through improved marketing and digital communications to grow sales and ensure relevance to today’s consumer, and through developing the people within the business. Given the existing relationship between the parties, with Asahi being a current key supplier to Fuller’s pubs and hotels business, and Asahi’s focus on brewing quality and brand building, Asahi was considered the ideal owner of the Beer Business and a valuable partner for Fuller’s. The Board believes that Asahi will foster an environment in which the Beer Business can flourish, both in the UK and internationally. Furthermore, the Board welcomes the fact that Asahi also views the Griffin Brewery as an integral part of Fuller’s Beer Business and intends to continue brewing on the site. The Board also believes that Asahi upholds Fuller’s key values of a genuine commitment to brewing excellence and that Asahi has a proven track record as a long-term steward of iconic brands around the world. The sale of the Beer Business does not end the Company’s association with the brands of the Beer Business. Fuller’s and AEL will form a strategic alliance by entering into a Long-Term Supply Agreement for the supply of the brands of the Beer Business (and selected Asahi brands) to Fuller’s pubs and hotels business. This will mean that Fuller’s staff and management will be able to continue to cherish, value and promote Fuller’s beer and cider brands and will enable Fuller’s customers to continue to enjoy their Fuller’s beer of choice. Recent structural changes to the beer industry, which have resulted in material economies of scale benefiting global brewers and a progressive beer duty spawning small brewers (resulting in over 2,000 breweries in the UK), have been challenging for the mid-sized Beer Business to navigate while maintaining the commitment made to customers to brew exceptional, award-winning beer at Fuller’s historic Chiswick home. In response to the challenges faced, the Beer Business has made a number of successful acquisitions including Cornish Orchards (a premium cider and soft drinks maker), Dark Star Brewing (a craft cask brewer) and Nectar Imports (a boutique drinks wholesaler). The Beer Business has also developed exciting new products (most notably Frontier Premium London Lager) as a way of driving volumes without the scale or financial capacity that larger competitors have to invest behind their brands. Given the structural changes outlined, and Fuller’s limited financial resources relative to global brewers, the Company’s ability to add further value and drive organic growth in the Beer Business and its brands is constrained. For these reasons, the Board views the Proposed Disposal as achieving significant long-term value creation for Shareholders and it will provide the Company with significant capital to invest in its premium pub and hotels business in order to drive future growth. INFORMATION ON THE FULLER’S BEER BUSINESS The Beer Business comprises the brewing, marketing and distribution of a portfolio of iconic premium beers including London Pride, Frontier Premium London Lager, a variety of cask and craft keg beers supported by a changing seasonal range as well as cider, wines, spirits and soft drinks. Following a number of recent acquisitions, it now also comprises: Cornish Orchards – a premium cider and soft drinks maker, based in Cornwall, United Kingdom which produces ciders and premium soft drinks;

Dark Star Brewing – a craft cask brewer, based in Sussex, United Kingdom and which was acquired by Fuller’s in February 2018; and

Nectar Imports – a boutique drinks wholesaler. Fuller’s main production facility is the historic Griffin Brewery in Chiswick, London, where brewing has taken place continuously since 1654. Additional production facilities are located in Cornwall and Sussex which are associated with Cornish Orchards and Dark Star Brewing respectively. A distribution centre is located in Horndean and Nectar Imports has a head office and distribution centre in Wiltshire. As part of the transaction, AEL will take control of all of these facilities. Products are sold into Fuller’s pubs and hotels, national pub chains, independent pub operators, supermarkets across the United Kingdom and exported to over 80 countries internationally. To provide a comprehensive offering to customers, the Beer Business also distributes selected third party brands alongside its own portfolio of premium brands. INFORMATION ON THE PURCHASER AEL is a wholly owned subsidiary of Asahi Group Holdings, a global beverage and food company listed on the Tokyo Stock Exchange in Japan with a market capitalisation of £14.8 billion(2) as at 24 January 2019 (being the latest practicable date prior to this announcement), and FY2017 sales and EBITDA of £14.6 billion(2) and £2.0 billion(2) respectively. Asahi was founded in Osaka, Japan in 1889 as the Osaka Beer Brewing Company with the goal of producing authentic and distinct Japanese beer to suit Japanese consumer tastes. Asahi aspires to be a clear leader in brewing quality and production technology, and is well-recognised for adhering to industry-leading standards. This commitment to high quality has been followed throughout Asahi’s history since opening its first brewery in 1889. In Europe, AEL has an unrivalled portfolio of iconic premium beers including Peroni, Grolsch and Meantime following the acquisition of these brands and related businesses of SABMiller from AB InBev in October 2016. Supported by state-of-the-art breweries, quality ingredients, and a culture that fosters innovation and encourages collaboration, AEL aims to bring the best quality of beer to their customers worldwide. The company has a significant international presence servicing customers in over 80 countries through its operations in the Netherlands, Italy, the United Kingdom, France, Canada and a global partner network that serves Europe, Africa, Asia and Latin America. (2) based on the exchange rate of £:¥ of 1:142.86 as at 24 January 2019 (being the latest practicable date prior to the publication of this announcement) SUMMARY OF THE TERMS OF THE PROPOSED DISPOSAL The Proposed Disposal is being made pursuant to the terms of the Sale and Purchase Agreement. Under the Sale and Purchase Agreement, Fuller's has agreed to sell its Beer Business for an enterprise value of £250 million on a debt free, cash free basis, subject to certain conditions to Completion. The Consideration is payable by the Purchaser in cash on Completion, subject to customary adjustments based on the amount of working capital, debt and cash in the Fuller's Beer Business at Completion. The Sale and Purchase Agreement contains certain warranties and indemnities given by each of Fuller's and the Purchaser which are customary for a transaction of this nature. Completion of the Proposed Disposal is conditional upon the satisfaction (or waiver, where applicable) of the following conditions: approval of the Resolutions by the A, B and C Ordinary Shareholders as well as the A Ordinary Shareholders at the Extraordinary General Meeting;

completion of a corporate reorganisation by Fuller’s to transfer certain assets and liabilities of its Beer Business to The Fuller’s Beer Company Ltd; and

obtaining a relevant confirmation from the UK Competition and Markets Authority in relation to the Disposal (Antitrust Condition). Under the Sale and Purchase Agreement, AEL has undertaken to pay Fuller’s £2.5 million if the Antitrust Condition is not satisfied by 31 July 2019 and the Sale and Purchase Agreement is terminated. Fuller’s has undertaken to pay AEL £2.5 million if the Sale and Purchase Agreement is terminated for any reason other than as a result of the Antitrust Condition not being satisfied and either: (i) Fuller’s announces the sale of its Beer Business (or substantially all of the assets of the Beer Business) to a third party within 12 months of the date of the Sale and Purchase Agreement; (ii) a takeover offer is made by a third party for Fuller’s and, prior to the earlier of Completion and 31 July 2019, the Fuller’s Board recommends the takeover offer, the Fuller’s Board does not recommend Shareholders approve the Resolutions or the takeover offer becomes unconditional as to acceptances; or (iii) the A Ordinary Shareholder Resolution is not approved by A Ordinary Shareholders at the Extraordinary General Meeting. In addition, Fuller's has agreed the terms of various agreements with the Purchaser which are intended to be entered into on Completion. These agreements are: a Long-Term Supply Agreement which will govern the supply to Fuller’s of: (i) beer, cider and other beverage products produced by the Fuller's Beer Business which AEL will acquire pursuant to the Proposed Disposal; (ii) beer, cider and other beverage products produced by AEL; (iii) wine; (iv) delivery and distribution services in connection with third party products; and (v) certain technical support services in connection with the provision of the above to Fuller’s pubs and hotels. The Long-Term Supply Agreement is for an initial term of five years and each party has the option to renew the agreement for a further five-year term;

a brand licence agreement which will govern the terms under which Fuller’s licenses to The Fuller’s Beer Company Ltd, on a perpetual, global, exclusive and royalty-free basis, certain trade mark rights (including the “Fuller’s” name, logo and cartouche) for the provision of beverages. Ownership of the licensed trade mark rights will be retained by Fuller’s. The brand licence agreement also contains mutual obligations to maintain Fuller’s respected brand reputation; and

a transitional services agreement which will govern the provision of services between the Retained Group and the Fuller's Beer Business for a transitional period after Completion. The Board expects that, subject to the satisfaction and/or waiver (where applicable) of the conditions precedent to the Proposed Disposal, Completion will occur in the first half of 2019. Both Fuller’s and AEL attach great importance to the skills, experience and industry knowledge of the Beer Business employees. It is expected that the majority of employees will remain with the Beer Business following Completion. However, subject to the outcome of legally-required consultation processes, certain employees may not have a role with AEL. Any redundancy proposals for any such employees who Fuller’s is unable to redeploy will reflect the valued contribution of such employees to the Beer Business over the years. Under the terms of the Proposed Disposal, all liabilities relating to the Pension Scheme would be retained by Fuller’s. USE OF PROCEEDS, FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL AND FUTURE STRATEGY Return of proceeds to Ordinary Shareholders The Company expects to return a total amount between £55 million to £69 million of the Net Cash Proceeds to Ordinary Shareholders which represents £1.00 to £1.25 per A and C Ordinary Share and £0.10 to £0.125 per B Ordinary Share. The Board will evaluate the amount and optimal way to distribute the Net Cash Proceeds to Ordinary Shareholders. The Board also intends to use some of the Net Cash Proceeds to make a contribution to the Pension Scheme and intends to initiate discussions with the trustees of the Pension Scheme regarding the proposed return of proceeds. All remaining funds will be used to grow and further develop the Fuller’s pubs and hotels business. Financial effects of the Proposed Disposal on the Retained Group In the 26 weeks ended 29 September 2018, the Beer Business contributed EBITDA of £5.6 million and operating profit of £3.7 million to the Fuller's Group. As at 29 September 2018, the Beer Business had total gross assets of £83.4 million. The Net Cash Proceeds arising from the Proposed Disposal are expected to be approximately £205 million at Completion, after relevant adjustments including estimated transaction, Reorganisation and separation costs. Fuller’s recognises the importance of regular semi-annual dividends. Accordingly it is the Board’s current intention to declare a final dividend for the financial year ending 31 March 2019 of an amount at least equal to the final dividend of 12.00 pence per A Ordinary Share and C Ordinary Share and 1.2 pence per B Ordinary Share declared for the 52 weeks ended 31 March 2018. Going forward, the Board intends to maintain a progressive dividend policy. This statement does not constitute a profit forecast or estimate and should not be interpreted to mean that future earnings per share, profits, margins, and/or cash flow will support such a policy. Future strategy Following Completion, Fuller’s intends to continue to pursue its successful stated strategy of ensuring its estate remains stylish, high quality and relevant to today’s discerning customer with even more focus than before. Fuller’s strategic vision will remain unchanged – to continue to be a leading operator of stylish pubs and hotels while growing through investment in carefully selected acquisitions and development. Our objective will remain on building a sustainable premium business for the long-term through developing and investing in the best people. The Retained Group’s predominantly freehold sites will be focused on the affluent areas in the south of England, and diversified across premium Managed Pubs and Hotels as well as Tenanted Inns. The Retained Group will continue to focus on delivering memorable customer experiences through outstanding service and hospitality from well-trained and motivated team members and a clear product offering around fresh, local food prepared on site by skilled chefs, supported by a portfolio of interesting and exciting premium drinks brands and boutique hotel accommodation. The Proposed Disposal supports a further strengthening of the balance sheet enabling Fuller’s to pursue attractive acquisition opportunities. In the future, the Retained Group intends to grow through continued development and investment in the Fuller’s pubs and hotels business and through acquisitions that have been carefully selected to further build on the current strategy of focusing on affluent areas in the south of England that enhance the Company’s premium offering. The Company will also continue to seek new opportunities to add further boutique bedrooms to existing sites and build on this part of the business. Fuller’s Tenanted Inns division will pursue its existing strategy of continuing to build its partnership business, including further rolling out its turnover-rent agreement that improves access to, and support from, the head office functions of Fuller’s pubs and hotels business for its tenanted business partners. EXTRAORDINARY GENERAL MEETING The Company will be sending a circular to Shareholders in due course containing further details of the Proposed Disposal and convening an Extraordinary General Meeting for the purpose of seeking Ordinary Shareholder and A Ordinary Shareholder approval for the Proposed Disposal. FINANCIAL AND LEGAL ADVICE The Board has received financial advice from Rothschild & Co as sponsor and financial adviser in relation to the Disposal. In providing its financial advice to the Board, Rothschild & Co has taken into account the Board’s commercial assessment of the Proposed Disposal. Freshfields Bruckhaus Deringer LLP has provided legal advice to the Company in relation to the Proposed Disposal. RECOMMENDATION TO ORDINARY SHAREHOLDERS In the Board’s view, the Proposed Disposal maximises value for Shareholders with the Retained Group being well placed to pursue the Company’s strategic vision of being the leading operator of stylish pubs and hotels. The simplification of the Fuller’s business and proceeds from the Proposed Disposal will also allow Fuller’s to focus management and financial resources on its fast-growing and successful pubs and hotels business, which today represents 87 per cent of Fuller’s operating profit (excluding unallocated costs). The Board therefore considers the Proposed Disposal to be in the best interests of Shareholders as a whole. Accordingly, the Board intends to recommend that Ordinary Shareholders and A Ordinary Shareholders vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting in due course. The Directors have each irrevocably undertaken to vote at the Extraordinary General Meeting in favour of the: (i) Ordinary Shareholder Resolution in respect of the Ordinary Shares to which they are beneficially entitled (representing approximately 6.16 per cent of the total issued Ordinary Shares of Fuller's as at 24 January 2019 (being the latest practicable date prior to the publication of this announcement)); and (ii) A Ordinary Shareholder Resolution in respect of the A Ordinary Shares to which they are beneficially entitled (representing approximately 1.35 per cent of the total issued A Ordinary Shares of Fuller's as at 24 January 2019 (being the latest practicable date prior to the publication of this announcement)). Certain other Ordinary Shareholders have given irrevocable undertakings to vote at the Extraordinary General Meeting in favour of the: (i) Ordinary Shareholder Resolution in respect of the Ordinary Shares to which they are beneficially entitled (representing approximately 22.03 per cent. of the total issued Ordinary Shares of Fuller's as at 24 January 2019 (being the latest practicable date prior to the publication of this announcement)); and (ii) A Ordinary Shareholder Resolution at the Extraordinary General Meeting in respect of the A Ordinary Shares to which they are beneficially entitled (representing approximately 4.27 per cent. of the total issued A Ordinary Shares of Fuller's as at 24 January 2019 (being the latest practicable date prior to the publication of this announcement)). Appendix The following definitions apply throughout this announcement, unless the context otherwise requires: “AEL” or “Purchaser”: means Asahi Europe Ltd, a wholly owned subsidiary of Asahi Group Holdings, Ltd. “A Ordinary Shareholders”: means the holders of A Ordinary Shares from time to time. “A Ordinary Shareholder Resolution”: means the ordinary resolution to approve the Proposed Disposal to be considered by A Ordinary Shareholders. “A Ordinary Shares”: means the A ordinary shares of 40 pence each in the capital of the Company. “Asahi”: means Asahi Group Holdings, Ltd. “Board”: means the board of directors of the Company. “Company” or “Fuller’s”: means Fuller, Smith & Turner P.L.C. “Completion”: means completion of the Proposed Disposal in accordance with the provisions of the Sale and Purchase Agreement. “Consideration”: has the meaning given to it in the Announcement. “Cornish Orchards”: means Cornish Orchards Ltd. “Dark Star Brewing”: means The Dark Star Brewing Company Limited. “Directors”: means the directors of the Company. “Disclosure Guidance and Transparency Rules”: means the Disclosure Guidance and Transparency Rules made by the FCA for the purposes of Part VI of FSMA, as amended from time to time. “EBITDA”: means earnings before interest, taxation, depreciation and amortisation. “Extraordinary General Meeting”: means the Extraordinary General Meeting of the Company to be convened for the purpose of approving the Resolutions. “FCA”: means the Financial Conduct Authority of the UK. “FSMA”: means the Financial Services and Markets Act 2000, as amended from time to time. “Beer Business”: means the division of the Company which comprises the entirety of Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling, as well as the distribution thereof, and also includes the Griffin Brewery, Cornish Orchards, Dark Star Brewing and Nectar Imports. “Fuller’s Group”: means, in respect of any time prior to Completion, the Company and its consolidated subsidiaries and subsidiary undertakings and, in respect of any time following Completion, the Retained Group. “Pension Scheme”: means the Fuller, Smith & Turner P.L.C. pension plan (a defined benefit pension scheme operated by the Company for eligible employees which closed to future accrual in January 2015). “Fuller’s pubs and hotels” or “pubs and hotels business”: means together the Managed Pubs and Hotels and the Tenanted Inns. “Griffin Brewery”: means the brewery at Griffin Brewery, Chiswick Lane South, Chiswick, London, W4 2QB. “Listing Rules”: means the Listing Rules made by the FCA for the purposes of Part VI of FSMA, as amended from time to time. “London Stock Exchange”: means London Stock Exchange P.L.C., of 10 Paternoster Square, London, EC4M 7LS. “Long-Term Supply Agreement”: means the long-term supply agreement to be entered into between the Company and the Purchaser as described in more detail above. “Managed Pubs and Hotels”: means the division of the Company comprising the managed pubs business, managed hotels business and the business conducted by The Stable Pizza & Cider Limited and Bel & The Dragon. “Nectar Imports”: means Nectar Imports Limited. “Net Cash Proceeds”: has the meaning given to it in this Announcement. “Ordinary Shareholder Resolution”: means the ordinary shareholder resolution to approve the Proposed Disposal to be considered by Ordinary Shareholders. “Ordinary Shareholder(s)”: means the holders of Ordinary Shares from time to time. “Ordinary Shares”: the A Ordinary Shares of 40 pence each, the B Ordinary Shares of 4 pence each and the C Ordinary Shares of 40 pence each in the capital of the Company. “Proposed Disposal”: has the meaning given to it in this Announcement. “Reorganisation”: means a corporate reorganisation by Fuller’s to transfer certain assets and liabilities of the Beer Business which are held by Fuller’s to The Fuller’s Beer Company Ltd. “Resolutions”: means the inter-conditional ordinary resolutions to approve the Proposed Disposal, consisting of the Ordinary Shareholder Resolution and the A Ordinary Shareholder Resolution. “Retained Group”: means the Company and its subsidiaries and subsidiary undertaking from time to time (excluding, for the avoidance of doubt, the Beer Business after Completion), being the continuing business of the Fuller’s Group following Completion. “Rothschild & Co”: means N.M. Rothschild & Sons Limited at New Court, St. Swithin’s Lane, London, EC4N 8AL. “Sale and Purchase Agreement”: means the sale and purchase agreement dated 25 January 2019 entered into between the Company and AEL in connection with the Proposed Disposal. “Shareholder(s)”: means the holder(s) of Shares from time to time. “Share(s)”: means the A Ordinary Shares of 40 pence each, the B Ordinary Shares of 4 pence each, the C Ordinary Shares of 40 pence each, the first 6 per cent cumulative preference shares of £1 each, and the second 8 per cent cumulative preference shares of £1 each in the capital of the Company. “Sponsor”: means Rothschild & Co. “Tenanted Inns”: means the division of the Company which comprises the pubs operated by third parties under tenancy or lease agreements. “The Fuller’s Beer Company”: means The Fuller’s Beer Company Ltd. “UK” or “United Kingdom”: means the United Kingdom of Great Britain and Northern Ireland. Sources Historical financials sourced from Fuller’s Reported Accounts with the exception of gross assets which are not publicly disclosed by Fuller’s and have been sourced from underlying reporting systems. Certain figures in this announcement have been subject to rounding adjustments.