Young’s has announced that it has reached an agreement with City Pubs to acquire the firm for approximately £162m.

As a result of the deal, shares in City Pubs is valued at 145 pence each, representing a 46% premium over the last closing price and a 65% premium over the three-month average, Proactive Investors has reported.

Young’s is a pub operator across London and the South East. Following the deal, it is expected to expand its trading estate by another 20% with the addition of more wet-led pubs.

As part of the agreement, Young’s said it “does not intend there to be any material reduction in headcount” to the ground staff, but it does intend to cut back on City Pubs’ existing management, corporate and support functions.

In order to finance the deal, Young’s secured a £130m loan agreement with Barclays, HSBC UK and National Westminster Bank.

Chief executive officer at Young’s, Simon Dodd, said: "We are excited to be announcing the proposed acquisition of City Pubs, with the full recommendation of their board. City Pubs is an excellent business we have followed for some time, and one which aligns closely with Young's in terms of both strategy and culture. Like us, City Pubs operates premium, individual and well-invested pubs and rooms, with a focus on the highest standards of customer service. Both businesses have performed well in a tough trading environment recently, testament to the strength of our business models, people and approach to customers.

"We believe that City Pubs is an excellent fit with Young's and the combination of the two businesses represents a compelling opportunity for all stakeholders. It will allow us to expand our estate through the addition of a complementary, high-quality pub and bedroom portfolio, with the potential for the benefit of significant operational synergies to be realised by both sets of shareholders, through the partial share offer."

Investment director at AJ Bell, Russ Mould, added: "Young’s making a bid for City Pub Company looks like a more standard takeover situation. The latter was always going to be a bid target from the day it was created. Executive chairman Clive Watson was a founding director of Capital Pub Company which was subsequently acquired by Greene King. He then set out to repeat the business model of building up a portfolio of posh pubs via City Pub Company, and low and behold another big player in the market wants to snap it up.

"Young’s has been more of an organic growth story but buying City Pub Company would boost the size of its managed pub estate by more than 20%, making it a meaningful deal. The acquired pubs and bedrooms fit nicely alongside its own assets in terms of quality, giving it a bigger position in the UK pubs market and increasing its premium accommodation capacity by more than 25%."

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