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
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Mortgage Advisor - OTE £95,000

£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Day In a Page

Isis in Syria: Influential tribal leaders hold secret talks with Western powers and Gulf states over possibility of mobilising against militants

Tribal gathering

Influential clans in Syria have held secret talks with Western powers and Gulf states over the possibility of mobilising against Isis. But they are determined not to be pitted against each other
Gaza, a year on from Operation Protective Edge: A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians

Gaza, a year on from Operation Protective Edge

A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians
Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously

Illnesses, car crashes and suicides

Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously
Srebrenica 20 years after the genocide: Why the survivors need closure

Bosnia's genocide, 20 years on

No-one is admitting where the bodies are buried - literally and metaphorically
How Comic-Con can make or break a movie: From Batman vs Superman to Star Wars: Episode VII

Power of the geek Gods

Each year at Comic-Con in San Diego, Hollywood bosses nervously present blockbusters to the hallowed crowd. It can make or break a movie
What do strawberries and cream have to do with tennis?

Perfect match

What do strawberries and cream have to do with tennis?
10 best trays

Get carried away with 10 best trays

Serve with ceremony on a tray chic carrier
Wimbledon 2015: Team Murray firing on all cylinders for SW19 title assault

Team Murray firing on all cylinders for title assault

Coaches Amélie Mauresmo and Jonas Bjorkman aiming to make Scot Wimbledon champion again
Wimbledon 2015: Nick Bollettieri - Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!

Nick Bollettieri's Wimbledon Files

Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!
Ashes 2015: Angus Fraser's top 10 moments from previous series'

Angus Fraser's top 10 Ashes moments

He played in five series against Australia and covered more as a newspaper correspondent. From Waugh to Warne and Hick to Headley, here are his highlights
Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high