Outlook: Whitbread/Allied

THE FINAL denouement approaches, and it doesn't look good for David Thomas, chief executive of Whitbread. Mr Thomas continues to insist that his own pounds 2.35bn all shares bid for Allied Domecq's pubs is worth more than Punch's pounds 2.7bn, though he must know he's lost the argument. So he must either raise his terms or face rejection by Allied shareholders at Friday's extraordinary general meeting.

There are two difficulties with doing so. Hugh Osmond's Punch Taverns has more or less publicly promised to trump him should he do so. Even though this may be just bluster, in order better to deter him from doing so, it nonetheless must make Whitbread wonder whether there's any point. To raise his offer is also to risk a slap in the face from the City. At the moment the bid can be justified to his own shareholders as a good opportunistic deal. But Whitbread bids more, further putting back the time at which the deal becomes earnings enhancing, it will be accused of overpaying. That in turn might damage its share price and undermine the value of the enhanced deal. Mr Thomas is damned if he does, damned if he doesn't.

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