US cash heats up pub war

Punch to enlist American muscle in fight for 3,600 Allied inns
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PUNCH Taverns is close to securing heavyweight backing from a US buy-out specialist in its bid to scupper Allied Domecq's agreed pounds 2.3bn sale of its pubs to Whitbread.

Punch is poised to agree a deal with Texas Pacific to buy the 45 per cent of the private pub company that is owned by US investment bank Bankers Trust. Texas Pacific is believed to be the favoured buyer, although neither Legal & General Ventures nor CVC Capital Partners are out of the running.

All three potential stake buyers are thought to be backing Punch's efforts to clinch a deal with Allied at the expense of Whitbread. Punch, which owns 1,800 pubs, is expected to step-up its attempts on Tuesday when Whitbread announces the terms of its deal to buy Allied's 3,600 pubs.

Punch boss Hugh Osmond is keen for access to the same confidential information that Whitbread has been privy to, especially the terms of Allied's supply deal with Carlsberg-Tetley and details of its capital gains tax liability. Sources close to Whitbread believe that it can afford to out-bid Punch, as its offer is funded with equity and would avoid the tax liability that Punch's cash offer would incur.

Mr Osmond, who made his name by developing and floating Pizza Express, is also interested in buying Allied's fast-food division, including Dunkin' Donuts. There is speculation that Allied and Whitbread have come to an agreement that has a multi-million pound penalty clause if either side reneges on the deal. It is believed that break costs in excess of pounds 20m could rule out the possibility of a third party coming in with a rival bid.

Allied's agreement to grant Whitbread exclusive negotiating rights has already aroused discontent among shareholders. Some felt that Allied should have disposed of its pubs via an open auction to flush out other interested parties. Mr Osmond was particularly incensed by last month's news of the agreement with Whitbread, having had an approach of his own to Allied rejected only the week before.

Nevertheless, the City has applauded Allied's decision to divest its pubs in order to concentrate on its spirits brands, which include Beefeater gin and Ballantine's whisky. Analysts believe that Whitbread is better positioned than Allied to provide the estate with the necessary investment.

The announcement of the terms of Whitbread's deal on Tuesday will kick off a busy week for the pub sector with results due from Enterprise Inns, Greenalls and Bass.

The sector is alive with talk of deals as new companies and venture capitalists vie for control of thousands of pubs that the more traditional landlords are selling off.

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