Outlook: Allied/Whitbread

HAS Hugh Osmond's privately owned Punch Taverns got what it takes to bust up Allied Domecq's grandiose plan for selling its pubs and other retail interests to Whitbread? In the City it is assumed he doesn't, but Sir Christopher Hogg, Allied's chairman, would be unwise to count on it. Word is that Mr Osmond may be in a position to mount his counter bid by next week, and furthermore, that he stands a very high chance of success.

The tax issue which seemed to make the Whitbread route so much more attractive to Allied than the Punch Taverns one is now close to being settled. Allied believed that a simple cash sale to Punch would have triggered a whopping great tax liability. However, by selling to Whitbread for shares which would then be passed directly onto its own shareholders, this liability could be avoided. Ergo, Punch Taverns would need to bid pounds 300m to pounds 400m more than Whitbread to match it.

This, it now appears, is something of a red herring. Even though it is a private company, Punch could devise a similar "scheme of reconstruction" that would avoid crystallising the tax liability for Allied. This might require prior Inland Revenue approval, but there are precedents that would allow Allied shareholders to receive cash in hand, or loan notes, without it costing Allied an arm and a leg.

If this price disadvantage is removed, then Mr Osmond is obviously in with a much better chance. He only has to bid a bit more than Whitbread's pounds 2.5bn for Allied to be duty bound to recommend his offer. This is going to be embarrassing for Sir Christopher but it won't be half as bad for him as it will be for Whitbread. As it stands, Whitbread is not a terribly good company. Its share price has gone nowhere for some years and it has expensively had to buy in most of the retail brands it owns. If it fails to pull this deal off, its share price will bomb.

The effect of actually doing the deal may not be much better. To get the transaction through the competition authorities, Whitbread must demerge or sell its breweries. The more the competition authorities attempt to minimise the tie that supports those breweries, the less they are worth. In other words, the deal could end up destroying as much value as it creates. Mr Osmond is not there yet, but the smell of victory must be in his nostrils.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Ramsay Bolton in Game of Thrones
tvSeries 5, Episode 3 review
News
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tv
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence