OFT investigates Inntrepreneur
Trading watchdog brought in as landlords complain of high beer prices to tied houses
Sunday 01 December 1996
The news comes as solicitors acting for120 landlords in dispute with Inntrepreneur have asked the Serious Fraud Office to probe the ownership arrangements in relation to information given to the OFT and Department of Trade and Industry.
The controversy comes at a sensitive time for Inntrepreneur. It wants the OFT to release it from undertakings that would force it to cut lucrative supply ties to 2,900 pubs that it still owns directly.
It is also still negotiating the sale to Japanese bank Nomura of 1,400 other tied pubs, which have been parked since May in Spring Inns, a company set up for the purpose.
Nomura has already taken control of 1,750 pubs owned by Phoenix Inns, which Inntrepreneur hived off in a pounds 254m mirror-image exercise last year.
Landlords, however - who are up in arms over punitive rents and supply deals - allege that continuing links between Inn-trepreneur, Grand Met and Fosters and all the pubs may be in breach of the undertakings given to the OFT and DTI.
Those followed Inntrepreneur's creation in 1991 with 8,450 pubs and the Government's "Beer Orders", which sought to cut the dominance of big brewery- owned chains. Inntrepreneur is arguing that Fosters' subsequent sale of Courage, the brewer, to Scottish & Newcastle has eliminated the need to cut the tie and restrict its estate.
"The application hasn't reached a conclusion yet and is still in the system," an OFT spokesman said this weekend.
"The Office is looking at the merger of Phoenix and Spring Inns, and in the course of that we will be looking at the competition aspects of all the ownership arrangements."
Landlords, represented by solicitor Mark Barron, say they cannot compete with free houses such as JD Wetherspoon, which pay half the price for beer.
In a class action now being agreed, they also argue that such punitive ties are illegal under European law.
Last week, over 50 landlords resolved to take their complaints to the DTI. A new action group - Group 2000 - has been formed. Its leader, former publican Martin Moore, is meeting with Inntrepreneur chief executive Michael Foster on Monday.
Two aspects of Inntrepreneur's complex web lie at the heart of the fresh dispute.
The company still owns the legal title to the Phoenix and Spring Inns pubs, while ownership of both business operations lies in two Jersey trusts, administered by insurer Guardian Royal Exchange.
"Recent events have shown there are a number of legitimate concerns about the nature of the relationship between Inntrepreneur, Phoenix, Spring Inns and Nomura. I have taken up my concerns with the SFO," Mr Barrow said.
Inntrepreneur and Nomura, however, insist that there are no links between Phoenix and the Grand Met venture. Guy Hands, Nomura's managing director, said the Jersey structure was set up for tax reasons and the title retention was simply to save some pounds 2.5m of stamp duty.
Nomura is also understood to be furious that Inntrepreneur chose to ape Phoenix by parking Spring Inns in a Jersey trust. "It completely muddies the waters. They wanted to announce they'd sold it. In reality what they've done is to copy our structure to get Spring off balance sheet," another Nomura source said.
Both companies hope to complete the final sale of Spring Inns to Phoenix before Christmas, when all the property titles will pass over.
It is understood that the two sides are haggling over pounds 10m, including the tab for stamp duty, but the sale price will be around pounds 250m, against the pounds 262m put up by a NatWest-led bank consortium in a refinancing in May.
Grand Met and Fosters have underwritten the debt and will share any profits or losses on the transfer. In the meantime, Inntrepreneur executives are managing Spring Inns - another bone of contention with angry landlords.
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