Punch comes out fighting with £680m flotation

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The Independent Online

Punch Group, Britain's second biggest pub operator, issued the price range for its flotation yesterday, giving the company a market capitalisation of about £680m.

The group, which kicked off its investor roadshow presentations yesterday, will sell up to 100 million shares priced at 250p to 300p. It expects the share sale to raise around £250m, which will be used to cut debt and fund expansion.

The shares are expected to begin trading on 16 May.

Hugh Osmond, who has built up the chain of 4,200 pubs over the past five years with venture capital backing, will retain a 3 per cent stake in the business, worth around £20.5m.

Together with Roger Myers and Alan McIntosh, his fellow founding directors, Mr Osmond will net some £55m from the share sale. Mr Myers and Mr McIntosh will hold 5 per cent of the floated company.

Punch, which will trade under its original name Punch Taverns, is the fourth major company to unveil plans for a stockmarket listing in the past few months. It will have an enterprise value of about £2.2bn, including £1.5bn of debt.

The company, which is chaired by Giles Thorley, an industry veteran, intends to keep about £56m of the money raised to fund future deals.

Analysts said that Punch, which recently lost its number one landlord spot to Enterprise Inns, has plenty of acquisitions to target.

These include Pubmaster, the rival tenanted pub estate owned by the German bank WestLB, and Morrells of Oxford, a 320-year old firm of brewers and pub owners .

About £15m of the share sale proceeds will be used to pay down debt with £154m going to redeem loan notes from shareholders, a spokesman for Punch said.

The company added that there would be an opportunity for private investors to acquire shares, although the vast bulk of the placing would be targeted towards institutional investors.

The group's 400 employees and the owners of its tenanted and leased pubs would also be able to hold a stake in the floated business, it said.

Of the group's private equity backers, Texas Pacific will retain the largest stake at 24 per cent, down from an earlier stake of 30 per cent.

Punch has timed its flotation to cash in on the strength of the pubs sector, which has come back into investor favour because of the predictability of its earnings growth in uncertain markets.

Merrill Lynch is managing the share offering and Deutsche Bank and Schroder Salomon Smith Barney are helping to sell the stock.

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