Punch wins Spirit pubs auction with knockout £2.7bn offer

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The Independent Online

The pubs group Punch Taverns has won the closely contested auction for the privately owned Spirit Group with a £2.7bn bid, beating off the rival bidder Robert Tchenguiz. The deal is expected to be announced as early as this morning. Mr Tchenguiz is understood to have bid £2.5bn.

Spirit boasts more than 1,800 managed pubs, including the Chef & Brewer and John Barras chains. It is owned by a consortium of private-equity firms comprising Texas Pacific, Blackstone Group, CVC Capital Partners and Merrill Lynch Global Private Equity. They kicked off an auction for Spirit after receiving several unsolicited approaches.

Spirit has about £2.1bn of debt, suggesting its owners are sitting on about £1bn of equity. The management, led by chief executive Karen Jones, is believed to be holding a combined stake worth tens of millions of pounds. Hugh Osmond, the entrepreneur who founded Spirit, has retained a small stake.

The deal will reunite the managed and tenanted pubs of the original Punch Taverns, which was forged by Mr Osmond from the former Allied Domecq pub estate. Mr Osmond snatched Allied Domecq's pub estate from Whitbread in 1999 after a ferocious David-and-Goliath-style battle with the then brewer. After the deal, Punch Taverns hived off its managed pubs into a separate division, Punch Retail, later renamed Spirit Group.

Punch and Mr Tchenguiz, an Iranian property tycoon, had emerged as the front-runners in the auction, ahead of the billionaire private investors, the Barclay brothers.

A secondary auction for some of Spirit's pub assets seems likely. Tim Clarke, the chief executive of the rival Mitchells & Butlers, said yesterday he would want to acquire "a few hundred pubs" from Spirit's new owner.

M&B had talked to Punch about teaming up to bid for Spirit but then abandoned that idea. M&B is looking to buy 300 to 400 pubs of Spirit's Chef & Brewer brand, which were part of the Scottish & Newcastle estate that it bid for two years ago and lost to Spirit.

Other possible bidders for parts of the Spirit estate include the regional pubs group Wolverhampton & Dudley and Greene King.

The deal may raise eyebrows in the City as Punch is already heavily indebted and is expected to take on more debt to fund the acquisition.

Spirit reported last month that like-for-like sales at its 1,832 pubs had risen by 3.9 per cent in the three months to 20 August. In the first eight weeks of the new financial year, sales rose 3.2 per cent.

Spirit and Punch declined to comment last night.

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