A £2.7bn bid from a consortium led by the property tycoon Robert Tchenguiz for the All Bar One owner Mitchells & Butlers was in tatters yesterday after Goldman Sachs pulled out.
R20, Mr Tchenguiz's investment vehicle, tried to put a brave face on the situation, saying it would follow up an informal approach - made on Wednesday evening - with a proposal in writing. But sceptics said the withdrawal of Goldman was likely to be a major hindrance to Mr Tchenguiz's chances of being able to mount a serious offer. Mr Tchenguiz, whose bid is also being supported by Barclays Capital, HBOS and Apax, did not say whether it had another institution ready to step into Goldman's shoes.
An insider said: "They had a very good consortium in place which is now being blown apart by the chairman saying he didn't want to talk and Goldman saying they didn't want to go hostile."
R20 said any firm offer would be dependent on the pubs group opening its books and recommending its offer to shareholders. "The consortium's preconditions to announcing a firm intention to make an offer include the following: a short period of confirmatory due diligence, final investment and credit committee approvals of the financing banks and equity consortium members and a recommendation by the board of Mitchells & Butlers that shareholders accept the offer."
Late on Wednesday R20 made an informal approach to Roger Carr, the chairman of M&B, to acquire the company for 550p a share in cash. R20 was immediately rebuffed, whereupon Goldman, which acted as its financial adviser and funding provider, decided to walk away. The investment bank said it did not want to be associated with a hostile bid and M&B made clear it was not willing to enter into discussions on that basis.
Britain's second-largest pubs group, which runs some 2,000 managed pubs including the O'Neill's and Harvester chains, thinks the business is worth 600p a share.
Last week the UK Takeover Panel issued a "put up or shut up" notice, saying the consortium must bid by 8 May or withdraw.
R20 had secured debt financing for the bid from Barclays, HBOS and Goldman, and a £900m equity package from the private-equity group Apax, Goldman and HBOS.
Mr Tchenguiz faces the extra cost of unwinding a complex £1.8bn securitisation that M&B carried out in 2003. This is necessary to split the property assets from the operating company, a common move. Undoing this securitisation would force Mr Tchenguiz to pay bondholders £260m, equivalent to an extra 50p a share. That means he is unlikely to raise his bid above 550p.
R20 now hopes M&B shareholders will put pressure on the board to consider the offer. UBS analysts said: "We believe some shareholders may tell management they would accept 550p a share. We view this as a good exit price and we would not expect any other bidders at this price."
Mr Tchenguiz is keen to make a major pubs acquisition after narrowly losing out to Punch Taverns in a £2.7bn deal for Spirit Group in December. He is now looking at buying 300 pubs of the Spirit estate being sold by Punch.
The Iranian property tycoon has built a pub empire which runs around 418 managed pubs under the Slug and Lettuce, Hog's Head and Yates's brands. He also owns around 450 tenanted pubs. In addition, he was involved in a consortium which recently mulled a bid for Britain's biggest nightclub operator, Luminar.
Both R20 and M&B declined to comment beyond the statements.
Shares in M&B jumped nearly 8 per cent to 499p on news of R20's informal approach.Reuse content