Punch Taverns looking to a flotation before going on acquisition trail again

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The Independent Online

Punch Taverns, the 5,100-strong pubs operator, is likely to defer any further major pubs deals until after a stock market flotation next spring.

Punch was linked in weekend press reports with a possible merger with Laurel, the new name for the portfolio of pubs bought from Whitbread by Morgan Grenfell Private Equity earlier this year. Such a deal would create a giant with 7,600 pubs which would control 12 per cent of the country's 65,000 public houses.

Punch declined to comment on the reports though it has not denied that it has held discussions with Laurel. However it is understood that the company, led by Hugh Osmond, would prefer to press ahead with plans for a stock market flotation in the first half of next year and that another blockbuster deal before then would push back that timetable.

Another drawback for a Punch-Laurel deal is that the 2,500 Laurel pubs are at an earlier stage of development than the Punch sites, which have already been grouped into managed and tenanted divisions. It is thought that Punch would like to see more work undertaken on the Laurel portfolio before the managed and tenanted divisions of the two groups could be put together.

Morgan Grenfell Private Equity is not believed to be a long-term holder of the pubs which have been tipped for a trade sale. Punch looked at the chain before but was outbid by Morgan Grenfell. If Punch did buy the Laurel chain it could present competition concerns.

Punch is valued at around £4bn after buying a string of pub chains. It started by outbidding Whitbread for the Allied Domecq estate in 1999. It had already bought 1,400 pubs from Bass. Laurel is valued at around £1.4bn. After buying Whitbread's pubs business for £1.65bn it sold off 500 of them, raising £230m. Punch's pub estate has been securitised, meaning its cash flows have been used to back substantial bond issues. Laurel's estate has not yet been securitised.

The possibility of another big pubs deal shows that the redrawing of the map of British pub ownership is a long way from being complete. The other piece of the jigsaw is the 5,500 pubs controlled by Nomura.

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