Company of the week: Allied Domecq

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The Independent Online
ALLIED DOMECQ saw its shares register the biggest loss in the FT-SE 100 last week as the bitter battle over the sale of its pubs took a new twist. Whitbread's offer, which the board had recommended to the shareholders, was unexpectedly referred to the Competition Commission, forcing Whitbread to withdraw its offer.

Allied, the world's number two drinks company after Diageo, now has to negotiate the sale of its 3,500 pubs to its rival bidder Punch Taverns Group. While Punch's proposal stands at pounds 2.925bn in cash, the closely held company has yet to issue a final bid and could well reduce its offer. An exclusive agreement with Whitbread had prevented Allied from negotiating directly with Punch before last week.

"These discussions [with Punch] are continuing," Allied said in a statement. If a "satisfactory agreement" isn't reached, Allied plans to demerge the UK retailing business from its other operations, the company said.

Punch is poised to become Britain's second largest pub company after Nomura International. The battle for Allied's pubs has sparked consolidation in the competitive industry.

Bass, which is planning to buy up to 650 of the pubs from Punch, said that it is "delighted" that Allied is now talking to Punch.

Along with its 3,500 pubs, Allied is selling 25 per cent of Britannia and its 50 per cent interest in First Quench off-licences, which operates the Victoria Wine chain.

Allied wants to focus on its drinks brands, including Ballantine's whisky and Kahlua liqueur. Because of its position in the world market it has attracted the attention of Warren Buffett, the American investor who bought a 2.2 per cent stake in April.

Punch was formed in 1997 by its chairman, Hugh Osmond, and Roger Myers, founder of Pelican Group, a restaurant company now owned by Whitbread. The company was created from the purchase of 1,455 largely tenanted pubs from Bass. Texas Pacific, an American private equity company, owns 70 per cent of Punch.