The bar is lowered for £2.5bn sale of Mitchells & Butlers

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The Independent Online

More than £60m in bankers' fees has been trimmed from the mooted £2.5bn sale of Mitchells & Butlers, the pubs-to-restaurants operator, paving the way for a private equity purchase.

Typically, listed companies are loaded up with bank debt, which has to be refinanced under "change of ownership"' rules. Fees on this are usually around 2 per cent of the amount refinanced, though it could be more at the moment given the weakness of the debt markets.

A leading leisure analyst estimates that Mitchells & Butlers has about £2.9bn of debt, but this has been securitised against its property portfolio. This type of debt does not carry the same change-of-ownership stipulation.

A source said: "There are securitisation notes held by a range of banks. They are securitised against the underlying assets – Mitchells & Butlers is real estate intensive."

The saving will help the private equity bidders – which include a Blackstone/CVC joint approach and Cinven – to finance a deal. Private equity has been struggling to raise debt and an industry source said it would help make the numbers for an all-cash offer.

The leading trade contender is Punch Taverns, which wants to create a £4bn market leader.

Mitchells & Butlers is now undertaking a strategic review, which sources believe will lead to a sales process kicking offin May. At least three prospective bidders have signed confidentiality agreements with Mitchells & Butlers, which is being advised by Citigroup and Greenhill.

Robert Tchenguiz, the Iranian property tycoon, is the company's biggest shareholder with a 23 per cent stake. Pubs are a favourite investment for Mr Tchenguiz, who also owns the Laurel Pub Company. However, he is considering selling up to 100 underperforming pubs in this portfolio.

A spokeswoman for Mitchells & Butlers declined to comment.

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