Pubmaster deal makes Punch top landlord

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The Independent Online

Punch Tavern's £1.2bn acquisition of Pubmaster yesterday sealed a £36m windfall for the privately owned pub group's management team and staff.

John Sands, Pubmaster's chief executive, will receive about £6m for his 3.5 per cent stake, while more than half of the company's 220 staff will pocket payouts, worth hundreds of thousands of pounds.

The deal, which comes just weeks after Spirit's £2.5bn purchase of Scottish & Newcastle's pub arm, transforms Punch into the UK's biggest landlord with about 7,400 pubs. Punch shares jumped 14 per cent to 398p, their highest level since the group, which was founded by the leisure entrepreneur Hugh Osmond, was floated last year.

Giles Thorley, Punch's chief executive, said the group would sell 206 pubs to avoid creating local monopolies. He signalled his appetite for further deals, noting the pub market remained "very fragmented".

The purchase price includes £1bn of debt, valuing Pubmaster's equity at £163m. Of this, 22 per cent is owned by the group's management team. The other major shareholders, who have all promised to back the deal, are the Tchenguiz brothers with 34 per cent, WestLB, the beleaguered German investment bank, with 22 per cent, and Lehman Brothers with 21 per cent.

Mr Thorley said Punch had been eyeing Pubmaster for years and had decided to make a move in the summer. He said Mr Sands would stay on for at least three months to help oversee what he anticipates being "an easy integration" process.

Punch, which announced the deal alongside strong full-year results, expects to make about £10m a year in savings from the deal by cutting head office, marketing and purchasing costs. Mr Thorley said it was too early to speculate on the scale of job losses. Analysts at Merrill Lynch forecast that the deal would boost Punch's earnings by about 25 per cent in 2004.

Punch, which leases its pubs to tenants and takes a share of their profits, said its pre-tax profit for the year to August rose 22 per cent to £113m.

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