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.

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
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

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London