The main contenders for the £1.5bn estate are the Nomura-owned
Principal Finance Group, headed by Guy Hands, Hugh Osmond's Punch Group and the private equity company Candover, which has yet to acquire a pub estate.
Candover is after the managed pubs, which include the High Street brands Hogshead, Casa, and Dome, and is looking for a buyer of the 1,700 leased estate, valued at around £600m.
It has been talking with Pubmaster's chief executive, John Sands and another trade buyer, believed to be Enterprise Inns, for the leased estate. One source said: "They are still running their own mini auction."
A last-hour bid by Luke Johnson, boss of the Belgo restaurant group and a former partner of Osmond in PizzaExpress, has run into problems after lawyers for Punch wheeled out a "non compete" clause Johnson had signed with Osmond.
The three-year "non-compete" agreement, came in when Texas Pacific Group, the American-based private equity firm, invested in Punch in 1999.
Mr Johnson's shareholding was transferred into the New Punch group and he also received a cash payment. In exchange for the cash and shares, Johnson agreed not to compete with Punch for tenanted pubs. The Whitbread estate consists of 1,710 leased pubs and 1,288 managed pubs. Johnson could still bid for the managed pubs, but Whitbread is believed to want to sell the whole estate to one buyer.
Johnson's bid is backed by Deutsche Bank's private equity arm, Morgan Grenfell Private Equity, with finance from Lehman Brothers.
Industry insiders say Whitbread will start negotiations with the highest bidder next week but will not reject outright the other serious bidders. One said: "The highest bid on the table is not necessarily from the best bidder."
Two names mentioned early on in the running, Cinven and Schroder Ventures, are not now expected to be among the final bidders.
Nomura is regarded as the
favourites ince it will have little problem raising cash. It put in an early indicative bid of around 1.4 billion pounds, but is expected to have raised this offer by the deadline.
Nomura won the auction for 988 of Bass's smaller managed pubs last month by increasing its bid to 625 million pounds from 575 million. This made the group Britain's largest pub owner, with some 5,700 outlets, but it still wants more.
Nomura's Hands was the first to see the money to be made in buying up pubs and securitising the income stream by issuing bonds.
But he faces competition from Britain's number two pubs group Punch which runs 5,150 outlets. Punch's
offer is likely to be mostly cash but shareholders could also be offered a warrant that could give them an option over equity in the enlarged Punch group. This could be valuable if Mr Osmond floats the business at a later date.
Punch insiders say that £30m of efficiency savings could be achieved from merging Mr Osmond's existing managed pubs business with those being sold by Whitbread.
Whitbread, which is advised by Dresdner Kleinwort Wasserstein, put its pub estate on the market last year to focus on restaurants and leisure. A final decision by Whitbread on the sale is expected at the end of this month.