The Spirit saga has finally come to an end, with the managed pub company rejoining Punch Taverns after a lengthy split during which advisers, shareholders and private equity backers have all enjoyed considerable success. The £2.7bn deal, one of the largest during a frantic few years of restructuring in the UK pub industry, reunites two companies that were split prior to the IPO of the tenanted business in May 2002.
The deal provides a final exit for private equity backers Texas Pacific, Blackstone, Merrill Lynch and CVC Capital, which acquired the group prior to the stock market listing and later bolted on the pub estate of Scottish & Newcastle for £2.51bn. Through a series of smaller sales, debt recapitalisations and securitisation deals, the private equity backers were believed to have paid back their equity prior to the sale.
Punch already operates more than 8,200 pubs throughout the UK and the acquisition will bring the Punch Group total to over 9,500 pubs. The acquisition was funded with £1.25bn in new debt facilities and a placing of £275m of convertible bonds and up to £75m of new ordinary shares in Punch.
Following the deal, Punch intends to convert 753 pubs to a tenanted format within two years, and to undertake a detailed performance review of the remaining 1,000 pubs to assess the optimal way of extracting the greatest value. The sale of many of these pubs seems likely and there will be fierce competition from private equity and trade bidders alike. Subsequent to the Spirit deal, Punch announced its first disposal with the sale of 203 pubs to Admiral Taverns, a property player, for £40m.
Bids in the Merrill Lynch-run auction were thought to have been tendered by Robin Saunders’ Clearbrook Partners and tycoons Robert Tchenguiz and the Barclay brothers.