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Whitbread shares for Allied pubs

WHITBREAD and Allied Domecq yesterday confirmed that they are in preliminary discussions that could lead to Whitbread paying pounds 2.5bn for Allied's 3,500 pubs. In a joint statement the two companies said the transaction would be satisfied by the issue of new Whitbread shares to Allied shareholders and by the assumption of some debt.

The deal is expected to lead to several hundred head office and administrative job losses. The companies would not detail cost savings, but it is thought there would be benefits from greater food buying power. Whitbread is also keen to use some Allied sites to take its Travel Inn budget hotel chain from 200 to 400 units. Whitbread is likely to conduct a trade sale, management buyout or flotation of its brewing interests, which it would be obliged to sell.