Royal Bank of Scotland has sold its 918 tenanted pubs in Britain to Dutch brewer Heineken for 422 million pounds, another step in its exit from non-core businesses following a government bailout.

Heineken, the world's third-largest brewer and which will become one of Britain's leading operators of tenanted pubs with 1,380 premises, will have a wider channel to sell lagers such as Foster's and Heineken itself, Europe's top-selling beer.

Tenanted pubs -- run by lessees who pay rent and are 'tied' to their landlord when buying beer -- have fared less well during the downturn than outlets managed on behalf of pub companies, which have greater freedom on pricing.

The two biggest tenanted pub companies -- Enterprise Inns and Punch Taverns -- have seen profits decimated and been forced to sell underperforming pubs.

Heineken said on Friday the sites it was buying were of high quality and had outperformed the market, adding the deal should add to earnings immediately.

It already owned the Globe chain of 462 tenanted pubs -- -- following its 2008 takeover with Danish peer Carlsberg of Scottish & Newcastle. The Globe pubs were now profitable and also outperforming the market, Heineken said.

Citigroup said while the price Heineken was paying appeared respectable it queried the strategy behind the deal.

It is committing capital to what we believe is probably the most rapidly declining part of the UK beer industry, it said.

KBC Securities analyst Wim Hoste said: I would have preferred if they had made acquisitions of breweries in emerging markets rather than strengthen their network of pubs in a country such as the UK.

Citigroup said the price represented 9.2 times the business's 2010 earnings, while Punch and Enterprise Inns were trading on multiples of 9.0-10.5 of 2011 earning. At best, the deal can be seen as a way to acquire UK pub assets cheaply from a keen seller.

Heineken shares were up 0.5 percent to 34.9350 euros at 12:15 p.m., while RBS was up 4.6 percent to 21.5 pence, helped by a broader move higher by European banks.


RBS acquired the 918 pubs, one of which is the Punch Bowl in central London run by movie director Guy Ritchie, from Scottish & Newcastle in 1999. Under the terms of the deal, S&N continued to provide property management and beer to the pub estate.

The bank, 83 percent-owned by the government after its bailout during the credit crisis, said the sale was in line with a strategy to reduce non-core assets, which totalled 105 billion pounds at the end of September.

The Bank of England said on Thursday Britain's banks should build up capital buffers as increased insurance against an exceptionally threatening environment still dominated by the euro zone debt crisis.

Sources told Reuters on Monday RBS was examining a final set of bids for its RBS Aviation Capital aircraft leasing business which could fetch up to $8 billion.

Nomura advised Heineken.

(Reporting By Philip Blenkinsop and Matt Scuffham; Editing by Mike Nesbit)