The future shape of the UK managed pub sector is being mapped out by some of the biggest names in private equity.
It is not just a matter of who wins the upcoming auction for Scottish & Newcastle Retail, but what happens after that.
Details of the SNR sell-off process should be made public by the end of this month, to coincide with Scottish & Newcastle plc's preliminary results on July 1. But the planning and analysis by potential bidders is already well underway. Detailed critiques of the business, incumbent management team and financing options have been prepared.
The betting is that the 1,400 pubs and restaurants will end up in the hands of a major private equity house, with chairman Bob Ivell and his senior managers left intact. Cinven, BC Partners and Terra Firma, still managing Nomura's UK investments, are among the predicted front-runners in the bidding stakes.
Potential trade buyers such as Mitchells & Butlers, the sector's biggest operator, may have the firepower to go after SNR but could find it difficult to compete against the financial manoeuvrings open to the private equity fraternity.
The Laurel Pub Company has been keeping its profile high of late and has been mooted as a potential stalker for both MAB and SNR. Insiders believe a move on SNR by Laurel's private equity owners might well be on the cards, but would likely take the form of a reverse takeover with the SNR business in the driving seat. Alternatively, SNR and Laurel could eventually have the same owner but be run separately, at least in the short-term.
The same sort of scenario could also be envisaged with Spirit Group and its venture capital backers.
At this stage it's all speculation. But Round One offers all sorts of intriguing alternatives. The only thing certain is that the sell-off will only be the start of what promises to be a major sector shake-up.
The logic of MAB and SNR, the two biggest players, combining remains compelling. If MAB doesn't get SNR, will a newly independent SNR go after MAB? And if MAB misses out on the big deal will it look elsewhere to strengthen its market position? Whitbread's pub restaurant and lodge business looks a stylish fit for both protagonists.
And what of the managed sector's two other big beasts, JD Wetherspoon and Luminar? Will they sit idly on the sidelines? Unlikely.
The current bloodbath on the High Street suggests that deals need to be done in that market. Yates Group's Ha! Ha!, Urbium's Tiger Tiger and Regent's Walkabout are three prizes that look worth having even in that overly competitive arena.
Luminar has looked at deals before, and even Wetherspoon has been tempted to acquire with its Lloyd's No1 purchase. If these two don't make a move, others may look to consolidate around the Yates, Regent, Urbium and SFI estates.
There is no shortage of potential deals and private equity funding.
And what of Spirit, Laurel and Robert Breare's Noble House? They would be the ones with most to lose from any strengthening or consolidation between the current Big Five – MAB, SNR, Wetherspoon, Whitbread and Luminar.
Robert Breare has already said he is quitting the High Street. He is more a dealmaker than a retailer and may well decide to get out of pubs altogether. The backers of both Spirit and Laurel also look like having to decide whether to play or get out. Staying put doesn't seem an option.
A domino effect of consolidating deals looks the obvious consequence of the Scottish & Newcastle sale, which should keep the market busy.
It is not just a matter of who wins the upcoming auction for Scottish & Newcastle Retail, but what happens after that.
Details of the SNR sell-off process should be made public by the end of this month, to coincide with Scottish & Newcastle plc's preliminary results on July 1. But the planning and analysis by potential bidders is already well underway. Detailed critiques of the business, incumbent management team and financing options have been prepared.
The betting is that the 1,400 pubs and restaurants will end up in the hands of a major private equity house, with chairman Bob Ivell and his senior managers left intact. Cinven, BC Partners and Terra Firma, still managing Nomura's UK investments, are among the predicted front-runners in the bidding stakes.
Potential trade buyers such as Mitchells & Butlers, the sector's biggest operator, may have the firepower to go after SNR but could find it difficult to compete against the financial manoeuvrings open to the private equity fraternity.
The Laurel Pub Company has been keeping its profile high of late and has been mooted as a potential stalker for both MAB and SNR. Insiders believe a move on SNR by Laurel's private equity owners might well be on the cards, but would likely take the form of a reverse takeover with the SNR business in the driving seat. Alternatively, SNR and Laurel could eventually have the same owner but be run separately, at least in the short-term.
The same sort of scenario could also be envisaged with Spirit Group and its venture capital backers.
At this stage it's all speculation. But Round One offers all sorts of intriguing alternatives. The only thing certain is that the sell-off will only be the start of what promises to be a major sector shake-up.
The logic of MAB and SNR, the two biggest players, combining remains compelling. If MAB doesn't get SNR, will a newly independent SNR go after MAB? And if MAB misses out on the big deal will it look elsewhere to strengthen its market position? Whitbread's pub restaurant and lodge business looks a stylish fit for both protagonists.
And what of the managed sector's two other big beasts, JD Wetherspoon and Luminar? Will they sit idly on the sidelines? Unlikely.
The current bloodbath on the High Street suggests that deals need to be done in that market. Yates Group's Ha! Ha!, Urbium's Tiger Tiger and Regent's Walkabout are three prizes that look worth having even in that overly competitive arena.
Luminar has looked at deals before, and even Wetherspoon has been tempted to acquire with its Lloyd's No1 purchase. If these two don't make a move, others may look to consolidate around the Yates, Regent, Urbium and SFI estates.
There is no shortage of potential deals and private equity funding.
And what of Spirit, Laurel and Robert Breare's Noble House? They would be the ones with most to lose from any strengthening or consolidation between the current Big Five – MAB, SNR, Wetherspoon, Whitbread and Luminar.
Robert Breare has already said he is quitting the High Street. He is more a dealmaker than a retailer and may well decide to get out of pubs altogether. The backers of both Spirit and Laurel also look like having to decide whether to play or get out. Staying put doesn't seem an option.
A domino effect of consolidating deals looks the obvious consequence of the Scottish & Newcastle sale, which should keep the market busy.
