Charterhouse Capital Partners might have succeeded in its bid to enter the UK pub sector, but Cinven’s plans for a grander expansion suffered a setback last week as a potential joint bid for Spirit Group disintegrated.
Enterprise Inns, the largest listed pub operator in the UK, reportedly walked away from talks that could have led to an offer valuing Spirit Group at up to £3bn. Charterhouse has just agreed the acquisition of Barracuda, which owns 160 managed pubs and bars. (See page 6.)
Cinven might now look for an alternative partner, bankers said. It was keen to sell on parts of Spirit’s 2,000-strong portfolio to Enterprise, while retaining the bulk of the outlets itself.
Cinven is an experienced investor in the UK pubs business. In March 2002, it acquired the Unique and Voyager pub assets for €3.2bn. The estates were combined as the Unique Pub Company, but at the time of purchase they comprised the Unique group of tenanted pubs, while Voyager was undergoing conversion from a managed to tenanted business.
Enterprise Inns was part of the consortium that bought Unique, and was given an option to acquire the business at a pre-determined price. Cinven sold its interest to Enterprise Inns, achieving a cash return in excess of two-times invested capital.
Spirit was formed in April 2002 as a result of the demerger of Punch Pub Company’s managed estate. Newly independent, Spirit went on to buy a large pub estate from Scottish & Newcastle for £2.5bn a year later.
Punch is now operating as Punch Taverns and can be considered among other potential suitors for Spirit, according to some analysts. It bought Pubmaster for £1.193bn in 2003 and InnSpired Group for £335m in September 2004. Punch Taverns is 20% owned by Goldman Sachs. Spirit Group might also consider flotation an option, analysts said.