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Allied spurns Punch to back Whitbread offer

THE BOARD of Allied Domecq yesterday backed Whitbread's pounds 2.877bn bid for its 3,600 pub estate in preference to the pounds 2.925bn rival offer from Punch Taverns .

Allied directors argued that Whitbread offered shareholders greater certainty and safety.

Analysts and investors said there was little to choose between the bids and agreed that timing and issues relating to the exclusivity agreement between Allied and Whitbread were at the heart of the unanimous recommendation.

Hugh Osmond, the chairman of Punch, claimed the issue hinged on the Allied board's fear that it would break the exclusivity agreement with Whitbread and risk legal action if it recommended the Punch bid. "It's not about value," he said.

Shareholders, who will be sent the terms of both offers, will be invited to a specially convened EGM on 23 July to decide which bid they prefer.

However, Mr Osmond did not rule out the possibility of another offer before then while David Thomas, the chief executive of Whitbread, said he expected Punch to make another bid.

Mr Thomas said: "I would anticipate they will do everything in their power to increase their offer. That would be in the nature of the consortium and the way they've behaved to date."

Mr Osmond said: "I wouldn't say we're actively considering it but I wouldn't rule it out. If shareholders want to see a restructured offer, we would listen."

An analyst said: "Punch may increase its bid. The difference between the two is minimal at the moment. It's quite possible the difference in warranties makes the Whitbread one the safest at the moment."

Punch spent the day yesterday suggesting that acceptance of the Whitbread offer against the trend of the market was the result of the "old boys club of the beerage" and claimed that issues of corporate governance were at stake.

However, sources indicated that the board's decision had more to do with Philip Bowman, the chairman of Allied, persuading Sir Christopher Hogg, the chief executive, to back Whitbread.

Mr Thomas emphasised that certainty was behind the recommendation for Whitbread. "They know what they get when they sell to Whitbread."

Outlook, page 19