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 It seems U.K. pub groups Mitchells & Butlers plc and Punch Taverns plc are entangled in a curious game of cat and mouse.
M&B said April 14 it was considering picking up a $3.7 billion piece of Punch Taverns, the U.K.'s No. 2 pub operator by market value. It's a change of tack for M&B, which put itself up for sale in January and fielded an offer from Punch itself, only to see it withdrawn the next month. In pursuing a deal with Punch, M&B said April 14 it was considering
turning to PE investors who have in fact been gearing up for a possible investment in
M&B. As recently as April 10, sources confirmed for The Deal's Jonathan Braude that Blackstone Group LP and
CVC Capital Partners were working on an indicative bid for a minority
share of M&B, the debt-ridden pub and restaurant operator.
Permira Advisers LLP also made an offer for a stake worth up to 29.9%
of M&B, and Bain Capital LLC was also thought to be in the running. Back in January, Punch indicated it might get back on the M&A wagon and that it was talking with M&B, five months after it said it was considering its strategy. The company, which has the most outlets in the U.K., had been talking with No. 3 M&B that could have yielded a $22 billion company. Mitchells on Jan. 29 reported a £274 million ($541 million) loss from closing hedges related to an abandoned real estate joint venture, effectively putting itself on the block, Board noted. (CVC, TPG, Cinven, Permira and Blackstone, many of whom have dabbled in this area, as well as property tycoon Robert Tchenguiz, who has a 23% stake in M&B, were also named as possible suitors in press reports.) A Punch Taverns-M&B deal, Board wrote, "would follow well over a decade of asset-churning among U.K. pub operators as many of them exit brewing and focus on selling more food in upscale outlets." Punch began in 1997 after the acquisition of Mitchells' predecessor Bass plc's leased pub portfolio. The target would have added 2,000 owned and managed outlets to its own 8,400. For 2007, M&B had sales of 1.9 billion pounds, slightly above Punch's 1.7 billion pounds. Mitchells traces its inception to 2003, when Six Continents plc split in two. Six Continents' predecssor was Bass plc, which changed its name after selling Bass brewing interests. Punch in September 2007 said it was weighing its options. The company signaled it could spin off its Spirit managed pubs business, make an acquisition or orchestrate a cash payout to shareholders as it credited poor weather and flooding for hammering its pretax profit for the year ended Aug. 18, saying it would come in 2% to 3% lower. Spirit consists of 888 pubs, most of which Punch picked up with is $5.4 billion deal for Spirit Group Holdings Ltd. in January 2006. Punch itself has another 7,561 leased pubs. In April 2007, the pub group said it would sell 869 leased and tenanted pubs to privately held Admiral Taverns Ltd. for $653 million. PUNCH DRUNK The September 2007 news comes a year after Punch acquired the 82 Mill House Inns Ltd. pubs from Bank of Scotland plc for £169 million ($343 million). Also in 2006, Punch handed $1.1 billion worth of pubs to Menlo Park, Calif., buyout shop GI Partners, while it was digesting Spirit Group. The company has seen a flurry of activity over the last few years. In buying Spirit, Punch gulped down 1,808 watering holes from TPG, CVC, Blackstone and Merrill Lynch & Co. and became the largest operator in the U.K. It announced plans May 22, 2006, to divest 380 pubs with expectations of reaping an undisclosed amount, some of which may fall into the "golden brick" category, where the outlets are more valued for the land upon which they sit than their business as pubs, a company rep told The Deal. The 29 that were initially divested fell into that category.
PUB CRAWL Other buyers have long thirsted after British pub groups.
IN CASE YOU WERE CURIOUS A few inquiries from Punch's "Ask Giles" section of its Web site, where the company's chief executive will sort of answer reader questions:
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