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.