Advisers to Whitbread will meet this morning to decide how to sweeten its pounds 2.4bn bid after accepting that the terms are not sufficient, as they stand, to beat the pounds 2.7bn cash offer tabled by Punch. Allied shareholders are due to vote of the deal on Friday and Whitbread needs 75 per cent approval.
Weekend reports suggested that Whitbread would raise its offer by up to pounds 400m in cash in order to see off Punch. But sources close to Whitbread maintained yesterday that the "perceived gap" in the value of the two bids was nearer pounds 200m.
They also indicated that there was a variety of ways of improving the offer apart from a straight cash increase such as agreeing to make the bid unconditional on regulatory approval and offering to return capital to shareholders.
David Thomas, the Whitbread chief executive, is likely to wait until the last possible moment to improve his offer in order to gain an advantage over Punch.
Both the Whitbread and the Allied camps insisted that Whitbread would be able to raise the terms of the offer and still put it to a vote on Friday. However, Punch, led by Hugh Osmond, last night wrote to the Allied chairman, Sir Christopher Hogg, saying its legal advice was that any material change in the bid would require shareholders to be given 21 days' notice.
Punch said that Allied should now either adjourn Friday's meeting or recommend its offer instead to shareholders. But the privately-owned pub group also said it was prepared to come back with a higher offer and over the weekend Texas Pacific Group, Punch's main backer, was thought to be examining just that.
"If Allied gives us access to the same level of financial information that Whitbread has had for the last five months and we can find higher value in the business, then we will be flexible in our offer," said a Punch spokesman.
"We are here to win, we have powerful backing and we have delivered on everything we have promised so far."
Whitbread's bid is worth pounds 2.38bn, based on Friday night's closing share price of pounds 10.38. But Whitbread maintains that its offer is actually worth more than pounds 3bn, taking into account the synergy benefits that would arise from the acquisition of the Allied estate.
Punch has dismissed Whitbread's claims, arguing that it would have to generate savings of more than pounds 1bn to justify the claim.
Last night, it rounded on Whitbread, claiming it had executed a complete U-turn over the weekend. "As recently as last Friday Whitbread said it would walk away rather than increase its offer. Now it has accepted that our offer is higher than theirs. This is a 360 degree turn in the space of 48 hours."
The Whitbread camp responded by arguing that the difference between the value of the two bids amounted to a "gap in perception rather than reality". Nevertheless, it conceded that the issue had to be addressed by improving the terms.
Advisers to Whitbread also maintained that Punch could run into regulatory difficulties over its plan to sell on some of Allied's managed pubs to Bass for pounds 1bn.Reuse content