JD Wetherspoon is hoping to raise almost £100m for its war chest, as it aims to buy new sites and support a business battered by lockdowns.
The pub chain - one of Britain’s largest - is issuing up to 8,370,000 new ordinary shares at a price of between £11.00 and £11.20 a piece, according to a statement after market close on Tuesday.
Wetherspoon hopes to raise between £92.1m and £93.7m, becoming the first UK hospitality firm to tap investors for a second time amid the pandemic. The shares mark roughly 7pc of its existing issued share capital and shareholders have until Jan 22 to take up the offer.
Some of the money will go towards buying new properties, which it expects to yield higher returns due to cheaper sales prices amid the pandemic.
The group is looking at “a number of properties in central London”, as well as buying the freehold of pubs where it is the tenant and additional sites next to already successful pubs.
Founder and chairman Tim Martin, who owns a 27pc stake, previously told the Daily Telegraph that despite the carnage it has wreaked on the hospitality sector, he believes coronavirus has created a new opportunity to pick up new sites on more favourable terms. The chain has a smaller presence within central London.
Funds will also be used to strengthen its balance sheet and add liquidity, as the business tries to survive the ongoing lockdown and prepare to deal with restrictions pubs are sure to face once the economy reopens. It said it expects pubs to remain shut until the end of March.
This is the second time the FTSE 250 pub chain has turned to stakeholders for funds, having raised £137m through a share placing during the first lockdown in April.
It comes as Wetherspoon said it was burning £4.1m a week while its 872 sites are closed. Since March it has reduced staff numbers over 6,000 to almost 37,674, while senior staff have had pay cuts of 25pc to 50pc.
It also spent £13.1m implementing social distancing measures before reopening in July and August.
Founder Tim Martin, who has vocally opposed lockdowns in the past, said:
“The Covid‐19 outbreak is having a severe impact on the UK pub sector. After a number of false starts, the hospitality industry generally anticipates a return to more normal trading patterns in the spring and summer, as a result of the introduction of a mass vaccination programme.
“The equity placing announced today will help the company, along with the other actions it has taken, to emerge from the pandemic in a strong position.”
Analysts at Jefferies recommend buying the stock on the back of Wetherspoon’s “consumer focus, employee engagement, largely freehold estate and history of evolution”, which will allow it “to fast return to its former profitability”.