Allied Domecq rejects Punch's pounds 2.7bn offer

PUNCH TAVERNS, the privately controlled pubs group, is to take its pounds 2.7bn offer for Allied Domecq's pub estate direct to Allied's shareholders after the Allied board rejected its offer as "insufficiently attractive" and backed the rival bid from Whitbread instead.

Hugh Osmond, the chairman of Punch Taverns, came out fighting, saying: "Allied has decided not to put this offer in front of shareholders so we will do it for them."

He was speaking after the Allied board said it had decided not to recommend the Punch bid because it had "concerns relating to certain timing, tax, warranty and finance aspects" of the proposal. The company urged its shareholders to vote in favour of the pounds 2.5bn Whitbread all-share offer.

Allied Domecq said it had been "so advised" of this course of action by its advisers Goldman Sachs. But in a curiously worded statement Goldman placed the onus on the Allied directors. "In providing its advice Goldman Sachs International has placed reliance on the Allied Domecq directors' commercial assessment of the proposals," it said.

Sir Christopher Hogg, Allied's chairman defended his board's decision saying: "The cash offer from Punch didn't give our shareholders a stake in the business going forward." He said he felt there were still "some imponderables" regarding the potential tax liability of a cash bid. However, he paid tribute to Mr Osmond's determination. "He's done an astonishing job. You've got to hand it to him. His offer merited serious consideration and received it."

Though the headline figure of Punch's pounds 2.7bn cash bid was clearly higher than Whitbread's pounds 2.5bn offer, the Allied decision was based on the value to Allied shareholders of having an stake in Whitbread going forward and access to the proposed synergy benefits. Many analysts are saying that the final value of the Whitbread deal would be in the region of pounds 3bn. "The gap is just too much," an Allied spokesman said. But Punch countered: "Anyone who thinks all the synergy benefits will flow to Allied shareholders needs to go back to school."

Punch will now have until 2 July to press its case before Allied's shareholders vote on the Whitbread deal. Punch Taverns pointed out that Allied requires a 75 per cent majority to approve the deal. "They are running the risk of failure," a spokesman said.

Key shareholders in Allied include Phillips & Drew, which holds 11 per cent, and the Suntory group, which holds 3.6 per cent.

Punch Taverns has run a high profile and aggressive campaign to try to win control of Allied's pub estate. Its deal was part funded by a deal with Bass under which the Carling Black Label brewer would have paid pounds 1bn for some of Allied's best managed houses.

Whitbread's shares closed 19.5p higher at 1070p, though the Allied statement was not issued until after the stock market had closed.

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