Punch Taverns wins deal to acquire Spirit Group

Punch Taverns wins deal to acquire Spirit Group

	Published : Thu, 01 Dec 2005 10:05 By : David Simms Print this Story

LONDON: Britain's leading pub operator Punch Taverns Plc is all set to acquire Spirit Group, beating Robert Tchenguiz's investment vehicle R20, according to sources.

Tchenguiz has been informed that his current bid was inadequate to win the deal, leaving Punch as the sole bidder in the field. The company had quoted 2.6 billion pounds to 2.7 billion pounds for the private equity-owned Spirit.

The acquisition will make Punch, with its 8,000 tenanted outlets, Britain's largest pub operator. Spirit has a network of 1,800 managed pubs including the Chef & Brewer and John Barras chains. It had received four bids at the end of the deadline last week and Punch's appears to be the highest.

Punch, headed by chief executive Gile Thorley, had listed on the stock exchange in 2002 and had bought Pubmaster in 2003 and InnSpired and Avebury early this year. The listing happened after a private equity-owned Punch was split into Punch Taverns, which was floated, and Spirit, which remained with the equity firms. Spirit had subsequently bought Scottish & Newcastle's managed pub estate in 2003 for 2.5 billion pounds.

Punch's rival, Enterprise Inns, now No 1 in Britain, had grown through a spate of acquisitions in the recent past.

Private equity groups Texas Pacific Group, the Blackstone Group and CVC Capital Partners and investment bank Merrill Lynch have majority ownership of Spirit.

Analysts believe Punch, with backing from Citigroup, Morgan Stanley and Royal Bank of Scotland, will finance the deal through debt and equity. The deal will bring back a number of pubs under Punch banner. It is likely to convert many of the Spirit's managed pubs to its tenanted model and then sell off the bigger pubs such as Chef & Brewer to pub groups like Mitchells & Butlers or Greene King and recoup some 1 billion pounds.

Apart from the Iranian-born entrepreneur Tchenguiz, the other bidders were former WestLB banker Robin Saunders and Barclay Brothers.

Tchenguiz has some 800 pubs -- around 418 Laurel-managed pubs under brands such as Slug and Lettuce, Hog's Head and Yates and 450 Globe-tenanted pubs, most of which were bought from Spirit last year.

Spirit is understood to be saddled with a 65-million-pound pension deficit. It is also liable to pay 300 million pounds to refinance its funding structure and some 75 million pounds in transaction costs. It is estimated to have some 2.1 billion pounds in debt.