Groups merge to create pubs giant
Punch Taverns today announced plans to create a £3.7 billion pub giant by merging with troubled rival Mitchell & Butlers.
The deal would cement Punch's position as Britain's biggest pub company with more than 10,500 sites.
The move comes after Birmingham-based M&B - owner of chains including All Bar One and Harvester - last week racked up £274 million in losses following a collapsed £5 billion property deal last summer.
The firm's finance director resigned and the group confirmed potential takeover interest in a turbulent week for the business.
Under the merger, Punch and M&B's shareholders would each own 50 per cent of the new company. M&B's shareholders would also receive a cash payment of £175 million.
Punch, which boasts a pub estate comprising 8,450 sites, said the cost-saving logic behind the deal was "compelling".
"Punch believes that its proposal is attractive in terms of value, speed and deliverability," it added.
The boss of the new company would be current Punch chief executive Giles Thorley, with M&B's chief executive, Tim Clarke, becoming chairman.
This forces out M&B's current chairman, Roger Carr, whom shareholders called on to resign last week in the wake of the firm's disastrous property venture.
The group lost £274 million after hedging against rising interest rates last summer as part of the deal with entrepreneur and 23-per-cent shareholder Robert Tchenguiz. Banks withdrew funding from the property deal following the credit crunch and interest rates have since come down, adding to M&B's losses.
The stock market value of M&B has dropped around 50 per cent since the summer from a peak of £3.6 billion, and in December it was relegated from the FTSE 100 Index.
M&B, which operates around 2,000 premises under other brands such as O'Neills, said it was considering Punch's plans alongside other potential bidders. Private equity groups Blackstone, Cinven, TPG and CVC are also thought to be circling the group.
"The board has commenced its strategic review process and will give careful consideration to all proposals as part of this process," it added.
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