(Reuters) - British pub operator Marston's <MARS.L> said on Friday it will combine its brewing business with Carlsberg UK into a joint venture for a 40% stake and a cash payment of up to 273 million pounds.
Marston's, which has had to shut all its pubs due to the coronavirus crisis, said the partnership values its brewing business at up to 580 million pounds and Carlsberg UK's brewing business at 200 million pounds.
Carlsberg Marston's Brewing Company, the joint venture, would deliver annual cost savings of around 24 million pounds, expected by the end of the third year following the completion of the deal, Marston's said.
The new company will get both Marston's and Carlsberg UK's breweries and distribution centres in the UK.
Marston's, the two-century old brewer of Pedigree, Hobgoblin and Lancaster Bomber beers, has also been looking to sell pubs to cut debt and recently raised the target from such disposals to 85-90 million pounds.
Marston's net debt stood at 1.4 billion pounds at the end of fiscal year 2019.
The company said the venture, talks for which began late last year, will materially reduce debt and provide additional financial flexibility, and also allow it to focus on its pub and accommodation businesses.
The British government in March ordered all pubs to close in order to curb the spread of the coronavirus, which further hit the country's pub industry that had been grappling with rising costs and changing consumer habits.
Carlsberg, popular for its Danish pilsner, Export and Tuborg beers, is owned by Copenhagen-listed Carlsberg A/S <CARLb.CO>.
(Reporting by Tanishaa Nadkar in Bengaluru; Editing by Shinjini Ganguli)