Nomura upsets venture capitalists with pounds 700m bid for William Hill

Nomura International, the Japanese securities house, is Britain's biggest pub landlord and will become its second-largest bookmaker.
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The Independent Online
Brent Walker is expected today to announce the disposal of its William Hill betting shop subsidiary to Nomura International. The sale, for an estimated pounds 700m, will bring the curtain down on Brent Walker, leaving it as a quoted shell swamped by a pounds 500m debt mountain.

The former leisure conglomerate's directors met with its bankers yesterday afternoon to approve the sale. It follows the disposal earlier in the year of Brent Walker's Pubmaster chain and draws a line under one of the longest collapses in corporate history.

As well as being the official end of former boxer George Walker's dreams of heading a leisure and property empire, the deal has provoked interest as the latest in a line of ambitious acquisitions by Nomura. The Japanese house has now spent more than pounds 9bn of its own capital taking on the venture capitalists in their own back yard, outbidding private capital-backed management buyouts to snap up a series of attractive assets.

The pounds 700m bid for William Hill follows the pounds 1.2bn acquisition of 4,300 pubs from Inntrepreneur and Spring Inns, which when added to the 1,100 Phoenix Inns pubs it bought last year, made Nomura into Britain's biggest pub landlord. It joins similar purchases of Angel Trains, the rolling stock leasing company, and a portfolio of Ministry of Defence housing.

The deals are interesting not just for their size and the way they are taking a financial group into uncharted territory but for the way they are being structured. They are all examples of securitisation, a technique common in the US but relatively new over here.

Headed by workaholic financier Guy Hands, a 38-year-old former Goldman Sachs employee, Nomura's Principal Finance business has almost single- handedly brought securitisation to Britain.

Securitisation demands deep pockets but is potentially much more lucrative than the traditional agency work carried out by investment banks. It involves buying an asset with predictable cash flows, then issuing bonds to investors to pay down the debt taken on to make the initial purchase.

If the bank calculates correctly, the cashflow from the asset is greater than the coupon offered to the investors on their bonds and the retained cash enhances the value of the asset which the bank continues to own. After a period the assets are sold on or floated on a stock market and the bank books a profit on the deal.

Mr Hands, who masterminds the deals for Nomura, is gaining a reputation as the master deal-maker in the field whose skill in calculating the risks involved in these huge acquisitions is matched only by his chutzpah in persuading Nomura to use its enormous muscle to back the deals in the first place.

While working for Goldman Sachs three years ago he approached Nomura and set the department up. It now employs 70.

What is unclear is how profitable Nomura's bets will be. Having outbid rivals by substantial margins, it has a lot to prove. Securitisation has ruffled feathers in the world of venture capital. Time will tell if Nomura or Brent Walker's bankers are the winners from today's long- awaited deal.

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