A DEAL that could have led to some of Scotland's best-known watering holes falling under common ownership unravelled yesterday after industry giant Punch Taverns backed out of a £3.7 billion merger with rival Mitchells & Butlers.
Punch told investors it was still considering a joint offer with a third party, though sources close to the matter believe M&B is determined to remain independent.
The merger proposal would have created Britain's biggest pub landlord, with a 1
0,500-strong estate, bringing the bulk of the pubs once owned by former brewing giants Allied, Bass, Courage, Watneys and Scottish & Newcastle under single ownership.
North of the Border, Punch's sprawling portfolio includes the likes of Edinburgh's Café Royal Circle Bar and the Beehive Inn, while the M&B line-up includes Deacon Brodie's Tavern and Greyfriars Bobby in the Scottish capital and Glasgow's famous Horseshoe Bar.
Plans for a tie-up came after M&B, which also runs the All Bar One chain, suffered massive losses on transactions relating to a property deal it was forced to abandon last summer amid the credit crunch.
Punch had proposed a 50/50 merger plus £175 million in cash, but it said it had pulled back after a closer look at M&B's books and pressure from some of Punch's biggest shareholders.
Last night, shares in Punch closed almost 7 per cent higher at 554p, while those of M&B rose 4 per cent to 342.5p.
Punch confirmed it had been approached by a number of groups interested in "possible transactions involving Mitchells & Butlers".
Analysts said Punch and its partners could bid for bits of M&B if the latter decides to offload itself piecemeal.
Despite M&B's property troubles, rivals and private equity firms would once have been falling over themselves to buy its 2,000-odd pubs. However, the global credit crunch has left would-be buyers with few options and almost ruled out a cash deal.
One source said management was "determined to keep M&B independent" and "not particularly engaged" in the auction process.
BlueOar analyst Mark Brumby said: "If foot-dragging has secured (M&B's] independence ... then that may not be viewed positively. Though M&B possibly 'should' be taken over, the question is by whom.
"The City Code on Takeovers and Mergers requires any offer for M&B involving Punch must now be 'on less-favourable terms'."
Punch is understood to have held talks with private equity players Blackstone and CVC as well as a number of others that had been circling M&B. Punch chief executive Giles Thorley is also chairman of Blackstone-owned Tragus, which runs the restaurant chains Café Rouge and Strada.
Some major investors in M&B – chiefly property entrepreneur Robert Tchenguiz, who has a 23 per cent holding – see it as a property asset and are keen to see it maximise the value of its estate.
The full article contains 493 words and appears in The Scotsman newspaper.
