Punch withdraws from M&B

Punch Taverns said on Friday that it has dropped its proposed merger with M&B for the time being, having decided that it is not in the best interests of its own shareholders.

On February 4, Punch confirmed that it had submitted outline terms of a possible merger to M&B’s board, but following preliminary talks and due diligence, Punch concluded that “the terms proposed to Mitchells & Butlers are no longer in the best interests of Punch shareholders and therefore Punch is withdrawing its merger proposal.”

Punch has been approached by a number of third parties — which are thought to have included TPG, CVC Capital Partners, Cinven, Terra Firma and Apax — about joining up to do a deal with M&B.

Punch is now assessing whether any possible tie-up with a private equity group to bid for M&B would maximise value for its own shareholders.

However, Apax, Cinven and Terra Firma are believed to have dropped away.

Property tycoon Robert Tchenguiz owns 23.1% of M&B, while Irish race horse owners John Magnier and JP McManus jointly own around 4% through their investment vehicle Elpida.

Punch Taverns had propsed a 50/50 merger, with M&B shareholders receiving an additional £175m in cash payment.

Landsbanki stockbrokers were not surpised by the announcement today. “Punch would be giving up too great a share of the shareholders’ equity on its books to make a 50/50 merger palatable to its investors,” it said in a research note.

Back in January, Mitchells and Butlers first confirmed it had received takeover interest, following an aborted property deal with Robert Tchenguiz, which led to M&B having to unwind hedging positions and resulting in a £274m loss after tax for the company.