Bid war at Greenalls

Pubs chief looks at management buyout to foil Scottish & Newcastle
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The Independent Online
MARK MCQUATER, head of Greenalls' pubs arm, is being tipped to launch a pounds 1bn management buyout for the division in an attempt to scupper a bid from Scottish & Newcastle.

Mr McQuater, who is expected to leave Greenalls if S&N's bid succeeds, is thought to be looking for backing from venture capitalists to fund an offer for the 769-strong managed pub and restaurant estate. His interest will have been intensified by Friday's announcement confirming that Greenalls is in talks with S&N.

Industry sources believe that the pub sector is too alive with bid talk for S&N's interest to be unopposed. Venture capitalists have been falling over themselves to invest in pub companies generally and undervalued ones in particular.

Mr McQuater is not short of contacts in the venture capital industry. He worked for Natwest Ventures until 1989, then left for JD Wetherspoon, the quoted pub group. He joined Greenalls in 1994. He was unavailable for comment on Friday.

Several venture capital companies are thought to have looked at Greenalls' portfolio of pubs and restaurants, which include Millers Kitchen and Henry's Table, as well as its 69 Premier Lodge hotels. Punch Taverns is understood to have considered a bid before turning its attention to Allied Domecq's pub estate, which it has since agreed to buy. Nomura, led by principal finance pioneer Guy Hands, has also been linked with a bid for the estate. In December, Nomura agreed to pay pounds 370m for Greenalls tenanted pubs. Another possible bidder is Alchemy, the aggressive venture capitalist run by John Moulton.

A bidding war for the estate would suit Greenalls, which has come under pressure as its share price has fallen more than 40 per cent since 1996. It has been undermined by a number of factors, not least accusations that it overpaid for Boddingtons when it bought the pub group in 1995 for pounds 490m. The company, led by chief executive Lord Daresbury, has since decided to concentrate on its up-market hotels and health clubs.

S&N's interest in Greenalls' pubs tallies with its desire to increase its portfolio of managed pubs at the expense of its tenanted estate. However, a deal would take S&N's tied estate over the 2,739 limit imposed by the 1989 Beer Orders and may force the company to make disposals. S&N is not alone among traditional brewers in its preference for managed brands. Bass, for example, has been expanding brands like All Bar One and O'Neill's. For its part, S&N has been rolling out its Rat & Parrot and Chef & Brewer chains.

Meanwhile, newly formed companies have been snapping up the unwanted tenanted pubs. Most prominent has been Punch Taverns - which pipped Whitbread to buy Allied Domecq's 3,600-strong estate - Enterprise Inns, Pubmaster and the Unique Pub Company. All would be likely to take an interest in any tenanted pubs which S&N put on the market.

Whitbread, whose bid for the Allied Domecq estate was scuppered by a referral to the Competition Commission, would probably face similar problems if it bid for the Greenalls pubs.