Punch-Sprint deal beset by complexities |
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Sun, 03 Jul 2005 17:35
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Punch Taverns' unsolicited approach to Spirit Group appears to have been favorably considered since Sprint has called in Merrill Lynch to discuss on the possibility of a take over by Punch.
But analysts point out that the sale may not prove to be an easy one since the financial web around Sprint is a complex one that cannot be unraveled easily. The main hurdle is a debenture that has costly break clauses.
Then there is the burdensome task of sorting out supply agreements to brewers and a sale-and-leaseback, which is anything but simple, according to those in the know-how. A banker who has been closely associated with Sprint's operations was quoted as saying that the structure that has been put into place by investors in Sprint will ensure that this one is a dodgy deal, "They have been maximizing the extraction of value in the short term, which makes it problematic for long-term players," he said.
Texas Pacific, CVC, Blackstone and Merrill Lynch who are the private equity backers in Sprint have not been on the best of terms lately. This could again prove to be a barrier to a smooth take over. Additionally, rival pub operators say that Sprint has no organized structure and this will be a deterrent to whoever manages to acquire the group. If the deal does come through, it would be a huge relief to Karen Jones, chief executive of Sprint, who has battled hard to mould the group into a cohesive unit. An analyst said that Sprint's problem was that the group as a whole had little synergy, "The bottom 500 pubs should be converted to a tenancy format. Jones has been trying to run a curate’s egg in an industry that has become increasingly specialized," he observed.
Punch Taverns have made an approach to the group and have put up an offer of £3 billion. However, the second- biggest leased-pub operator in Britain would be reluctant to overpay for this deal. It has been on an acquisition spree lately and has added the prestigious InnSpired Group to its kitty. Punch is currently looking to restructure the group, thereby freeing up 150 million pounds. In such a scenario, it is unlikely to agree to get tangled in the complex financial structure of the Sprint group.
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