Scottish & Newcastle's directors should be feeling pretty pleased with themselves. Barring accidents, the auction of the brewer's retail division should now comfortably make in excess of £2.5bn – a price tag that even a few months ago looked overly optimistic.
The high valuations that the private equity investors left in the bidding have placed on the business reflects not only the asset value of the estate but, perhaps more significantly, the quality of the S&N Retail management, its organisation and its up-beat view of the managed pub, restaurant and budget hotel market.
Much credit must then go to retail chairman Bob Ivell and his senior colleagues who have been on a round of presentations to what they might have expected to have been a sceptical investment community. By all accounts they have managed to whip up some excitement for pubs again.
This then makes some of the national press coverage of the auction curious to say the least. The Guardian, not renowned for its business coverage admittedly, mused on who would run the S&N estate if a venture capitalist not linked to an existing retailer wins the battle? The same people who are running it now, dummy! This is not an asset disposal but the sale of a profitable business – and one of the best in the sector.
Other observers seem to think that Laurel or Spirit would make better buyers as their existing managements would run the S&N estate. At the prices being quoted, the private equity investors behind those bids are unlikely to discard the S&N Retail management or its strategy. Far from it. The S&N Retail team is what they now seem to be buying into big time.
Following Scottish & Newcastle's agm on Thursday, the main plc board trimmed the final bidders down to three or four, depending on your source. The unsuccessful were informed on Friday. The selection was purely down to price, leaving S&N Retail's biggest commercial rival Mitchells & Butlers out of the race, with its valuation a fair way short of the leading pack.
This is bittersweet news for M&B. It will be disappointed not to still be in the running, but pleased at least that investors can now put a premium on good pub, restaurant and budget hotel operators. The S&N valuation should help its own share price.
The question is what does M&B do next. The first job will be to work out the best way to return £400m to shareholders, something it promised on demerger from Six Continents.
Some believe that it will be vulnerable to a bid itself in the next year, either from the winner of the S&N race, keen for industry consolidation, or from one of the losing bidders still flush with funds. Others think M&B should look for other good-quality acquisition opportunities itself – and that might be another medium to big player with quality freehold assets.
The likelihood of either option will be largely dependent on how M&B's share price reacts over the coming months.
The really encouraging news from the current stage of the S&N auction is that the eating and drinking out market can still attract meaningful investment – and that valuations are not just down to bricks and mortar, but people and vision too.
• Left field speculation of the week has it that if Bob Ivell for some reason doesn't end up running the newly sold S&N retail business, there could be another top job awaiting him at the end of the year at his old company Whitbread. Intrigue indeed!
The high valuations that the private equity investors left in the bidding have placed on the business reflects not only the asset value of the estate but, perhaps more significantly, the quality of the S&N Retail management, its organisation and its up-beat view of the managed pub, restaurant and budget hotel market.
Much credit must then go to retail chairman Bob Ivell and his senior colleagues who have been on a round of presentations to what they might have expected to have been a sceptical investment community. By all accounts they have managed to whip up some excitement for pubs again.
This then makes some of the national press coverage of the auction curious to say the least. The Guardian, not renowned for its business coverage admittedly, mused on who would run the S&N estate if a venture capitalist not linked to an existing retailer wins the battle? The same people who are running it now, dummy! This is not an asset disposal but the sale of a profitable business – and one of the best in the sector.
Other observers seem to think that Laurel or Spirit would make better buyers as their existing managements would run the S&N estate. At the prices being quoted, the private equity investors behind those bids are unlikely to discard the S&N Retail management or its strategy. Far from it. The S&N Retail team is what they now seem to be buying into big time.
Following Scottish & Newcastle's agm on Thursday, the main plc board trimmed the final bidders down to three or four, depending on your source. The unsuccessful were informed on Friday. The selection was purely down to price, leaving S&N Retail's biggest commercial rival Mitchells & Butlers out of the race, with its valuation a fair way short of the leading pack.
This is bittersweet news for M&B. It will be disappointed not to still be in the running, but pleased at least that investors can now put a premium on good pub, restaurant and budget hotel operators. The S&N valuation should help its own share price.
The question is what does M&B do next. The first job will be to work out the best way to return £400m to shareholders, something it promised on demerger from Six Continents.
Some believe that it will be vulnerable to a bid itself in the next year, either from the winner of the S&N race, keen for industry consolidation, or from one of the losing bidders still flush with funds. Others think M&B should look for other good-quality acquisition opportunities itself – and that might be another medium to big player with quality freehold assets.
The likelihood of either option will be largely dependent on how M&B's share price reacts over the coming months.
The really encouraging news from the current stage of the S&N auction is that the eating and drinking out market can still attract meaningful investment – and that valuations are not just down to bricks and mortar, but people and vision too.
• Left field speculation of the week has it that if Bob Ivell for some reason doesn't end up running the newly sold S&N retail business, there could be another top job awaiting him at the end of the year at his old company Whitbread. Intrigue indeed!
