Punch board back Heineken’s £305m bid for pub estate

Claire Dodd

Claire Dodd

15 December 2016

Heineken has confirmed its £305m bid to acquire Punch Tavern’s 1,900-strong 'Punch A' pub estate has received the backing of the pubcos top three shareholders and its board of directors.

Punch Directors now intend to unanimously recommend to shareholders to vote in favour of the scheme – which forms part of a back-to-back deal with Vine Acquisitions – at the company’s general meeting. Vine Acquisitions is a newly formed 'bidco' company from Patron Capital Advisers.

In a statement released today, it was confirmed shareholders including Glenview Funds, Avenue Funds and Warwick Funds, and the directors which together represent 52.3% of the existing ordinary share capital of Punch, supported the deal.

Following regulatory approval, the Punch sites will be integrated into Star, making it the third largest pub company in the UK.

Yesterday Punch revealed it had received offers both from Heineken and from Punch’s founder Alan McIntosh.

Patron Capital Advisers in partnership with Heineken had initially issued a cash offer for the business, at 174p per share. McIntosh, however, under his investment business Emerald Investment Partners, launched a higher rival bid at 185p per share for the entire business.

However, it was revealed today that the Vine Acquisitions offer has now been increased to a final offer of 180 per share, valuing the company at approximately £402.7 million

In its statement, Heineken said: 'Heineken believes that there is compelling strategic rationale for enlarging its existing pub business through the acquisition of Punch A. Heineken considers pubs to be an integral part of British culture and that high-quality, well invested pubs run by skilled and motivated operators will continue to prosper. The portfolio of Punch pubs are located across the UK and are highly complementary to Star.'

Although Heineken has said it 'will work closely with the incoming licensees, helping them to realise increased potential from the pubs that they operate', concerns have already been raised from some areas of the trade.

Paul Waterson, Scottish Licensed Trade Association (SLTA) chief executive, said the body feared the deal would lead to a 'monster-tie'. Pub companies in Scotland adhere to a voluntary code, unlike England and Wales where pub companies with over 500 sites are obliged to offer tenants a free-of-tie agreement.

Waterson said: 'We have grave concerns about [the] announcement and urge the attention of the competition and markets authority. It would create a ‘monster-tie’; a chain of pubs that would destabilise an already fragile industry. A backwards move, it represents bad news for brewers, whose route to market will almost certainly be controlled by Heineken. It also signals bad news for drinkers who will be offered far less choice at the bar. Moreover, there are disturbing implications for tenants who are already compromised by the tied pub system, especially in Scotland where there is an absence of legislative protection.'

However, David Forde, managing director of Heineken UK, said: 'Today’s announcement is a huge vote of confidence in the Great British pub. Our proven track record of success demonstrates that well invested and well run pubs in the leased and tenanted sector can thrive. Today's development is good news for pub-goers across the UK who will see the benefit of better pubs in their communities. We look forward to welcoming new licensees in to Star, and to working with them to grow their businesses.'

Stephen Billingham, chairman of Punch, said: 'The Punch Board and management team have positioned Punch to drive long term value for shareholders and our recent performance has demonstrated the successful execution of this strategy reflecting the hard work and quality of the whole Punch team. While the Board did not solicit this offer for the company, we believe this is a good outcome for shareholders as the offer provides cash certainty at a significant premium.'

Following completion, the pubs acquired by Heineken UK will be operated for six months by Vine Acquisitions under a transitional services agreement, after which they will be fully integrated into the existing Star Pubs & Bars pub business, which currently stands at around 1,100 sites. The transitional services agreement has no impact on Star’s existing licensees, who will continue to trade on a 'business as usual' basis, it said.

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