Six Continents snubs £2.8bn cash bid for pubs

Six Continents has dismissed a £2.8bn cash offer for Mitchells & Butlers, the soon to be demerged pubs arm, which operates more than 2,000 pubs and restaurants including the All Bar One and Harvester chains, as too cheap.

The group, which also owns hotel brands including InterContinental and Holiday Inn, said it had received the offer from an unnamed financial buyer. "This proposal has been carefully considered ... a meeting has also taken place with the financial buyer to evaluate the proposal," the company said but added the offer was not deemed "sufficiently attractive".

It is thought the £2.8bn proposal came from the private equity firm BC Partners although other venture capital firms have also expressed an interest in the business. Shares in Six Continents, headed by the chairman Sir Ian Prosser, closed up 1p at 622.5p.

The rejection comes just two weeks after Six Continents saw off a £3.9bn hostile bid from the entrepreneur Hugh Osmond after shareholders voted overwhelmingly to back management's plans to spin off the pubs arm.

It also comes just three weeks before the demerger of the division, which also owns the O'Neill's chain, from the group's hotels arm. The divisions are expected to be listed separately on 15 April.

Analysts at Morgan Stanley said: "While it may be popular to criticise the company for rejecting another offer, this does seem the right decision to us – £2.8bn looks low. It is not offering a premium to our stand-alone valuation, and it is a large discount to book value – which we know private equity buyers pay more attention to."

Analysts value the pubs arm at about £3bn on a stand-alone basis, before any control premium. Investec yesterday estimated the division to be worth £3.4bn.

Six Continents said yesterday that it had received "a number" of expressions of interest from venture capitalists. Other potential suitors are said to have included the Laurel Pub Company, CVC Capital Partners and the former Nomura financier Guy Hands.

BC Partners, set up in 1985, has pulled off a number of high-profile deals including the purchases of Trader Media Group, the publisher of Auto Trader, the Irish drinks business Cantrell & Cochrane and the mozzarella cheese and salami maker Galbani.

But analysts also took the announcement as confirmation that both sides of the Six Continents group were up for grabs. KKR, Blackstone and CVC Capital are among private equity groups circling the whole of Six Continents, while Marriott, Starwood and Hilton are thought to be interested in the hotel arm.

"The statement further indicates that financing arrangements for Mitchells & Butlers may lead to an additional cash back to shareholders," analysts at Investec said, adding they thought that a likely option.