Punch set to trump Whitbread pounds 2.5bn offer

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The Independent Online
PUNCH Taverns, the privately owned pub group, is understood to be preparing a bid to trump Whitbread's pounds 2.5bn offer for Allied Domecq's pub estate.

Punch, which is backed by US investment houses Bankers Trust and Morgan Stanley, believes it can better Whitbread's price in a daring coup that could create the nation's largest pub landlord and pave the way for a stock market flotation.

If Punch does better Whitbread's bid, it would be left to Allied shareholders to decide between the offers. It was announced on Monday that Whitbread was in exclusive negotiations with Allied to buy its 3,600 pubs. The news was welcomed in the City, which believes that Whitbread, whose brands include Beefeater restaurants and Marriott hotels, would provide additional investment for the estate. Allied would be free to develop its spirits brands like Ballantines scotch and Beefeater gin.

However, the announcement angered Punch chairman Hugh Osmond, who had approached Allied only the week before to express his interest in the estate.

Sources close to the talks with Whitbread suggest that negotiations are progressing well.

One insider said: "Things are proceeding as we hoped, and we expect an announcement within a few weeks. I would be amazed if somebody can come up with a cash offer which can compete."

There are doubts that Punch will be able to match the pounds 2.5bn offered by Whitbread, which expects the deal to deliver annual cost savings of pounds 40m. Punch would also incur an additional capital gains tax penalty that Whitbread has avoided by funding its offer with equity.

However, Mr Osmond said: "We believe we can find a higher bid than the one reported, but we would like the same information as Whitbread has been pres- ented with."

He has written to Allied requesting access to information, including the terms of Allied's supply deal with Carlsberg Tetley and details of Whitbread's apparent tax advantage. Punch would probably choose to sell on a few hundred of the Allied pubs if its bid prevails.

Last week it was reported that Allied shareholders were keen for the pubs to be auctioned off to maximise the sale price. Institutional investors have become increasingly restless with the performance of Allied shares under chief executive Tony Hales.

Allied's biggest shareholder, with just over 8 per cent, is P&D, the fund manager that has recently begun to show a far more interventionist approach to its investments. The other main shareholders are Mercury Asset Management, Axa, Schroders and Prudential.