OFT investigates Inntrepreneur

Trading watchdog brought in as landlords complain of high beer prices to tied houses

The Office Fair of Trading is investigating the ownership of 6,000 current and former pubs of Inntrepreneur, the retailing joint venture between Grand Metropolitan and Fosters.

The news comes as solicitors acting for120 landlords in dispute with Inntrepreneur have asked the Serious Fraud Office to probe the ownership arrangements in relation to information given to the OFT and Department of Trade and Industry.

The controversy comes at a sensitive time for Inntrepreneur. It wants the OFT to release it from undertakings that would force it to cut lucrative supply ties to 2,900 pubs that it still owns directly.

It is also still negotiating the sale to Japanese bank Nomura of 1,400 other tied pubs, which have been parked since May in Spring Inns, a company set up for the purpose.

Nomura has already taken control of 1,750 pubs owned by Phoenix Inns, which Inntrepreneur hived off in a pounds 254m mirror-image exercise last year.

Landlords, however - who are up in arms over punitive rents and supply deals - allege that continuing links between Inn-trepreneur, Grand Met and Fosters and all the pubs may be in breach of the undertakings given to the OFT and DTI.

Those followed Inntrepreneur's creation in 1991 with 8,450 pubs and the Government's "Beer Orders", which sought to cut the dominance of big brewery- owned chains. Inntrepreneur is arguing that Fosters' subsequent sale of Courage, the brewer, to Scottish & Newcastle has eliminated the need to cut the tie and restrict its estate.

"The application hasn't reached a conclusion yet and is still in the system," an OFT spokesman said this weekend.

"The Office is looking at the merger of Phoenix and Spring Inns, and in the course of that we will be looking at the competition aspects of all the ownership arrangements."

Landlords, represented by solicitor Mark Barron, say they cannot compete with free houses such as JD Wetherspoon, which pay half the price for beer.

In a class action now being agreed, they also argue that such punitive ties are illegal under European law.

Last week, over 50 landlords resolved to take their complaints to the DTI. A new action group - Group 2000 - has been formed. Its leader, former publican Martin Moore, is meeting with Inntrepreneur chief executive Michael Foster on Monday.

Two aspects of Inntrepreneur's complex web lie at the heart of the fresh dispute.

The company still owns the legal title to the Phoenix and Spring Inns pubs, while ownership of both business operations lies in two Jersey trusts, administered by insurer Guardian Royal Exchange.

"Recent events have shown there are a number of legitimate concerns about the nature of the relationship between Inntrepreneur, Phoenix, Spring Inns and Nomura. I have taken up my concerns with the SFO," Mr Barrow said.

Inntrepreneur and Nomura, however, insist that there are no links between Phoenix and the Grand Met venture. Guy Hands, Nomura's managing director, said the Jersey structure was set up for tax reasons and the title retention was simply to save some pounds 2.5m of stamp duty.

Nomura is also understood to be furious that Inntrepreneur chose to ape Phoenix by parking Spring Inns in a Jersey trust. "It completely muddies the waters. They wanted to announce they'd sold it. In reality what they've done is to copy our structure to get Spring off balance sheet," another Nomura source said.

Both companies hope to complete the final sale of Spring Inns to Phoenix before Christmas, when all the property titles will pass over.

It is understood that the two sides are haggling over pounds 10m, including the tab for stamp duty, but the sale price will be around pounds 250m, against the pounds 262m put up by a NatWest-led bank consortium in a refinancing in May.

Grand Met and Fosters have underwritten the debt and will share any profits or losses on the transfer. In the meantime, Inntrepreneur executives are managing Spring Inns - another bone of contention with angry landlords.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in