Punch Taverns, the operator of 9,500 leased and managed pubs, has announced it has acquired Mill House Inns, the managed pub operator, in a cash deal valued at £164m. Mill House Inns, which was set up five years ago by Ted Kennedy, chief executive, comprises 82 freehold and long leasehold, community pubs located throughout the south of England and the Midlands. The deal, which values the company at just over £2m a pub, is funded from new short-term bank borrowings. It also includes the company’s two restaurant and bar sites under its Firestone branding and two small hotels. Punch expects the Mill House Inns pubs to be both earnings enhancing and to deliver a return in excess of the company’s weighted average cost capital in the first full year of operation. Giles Thorley, chief executive of Punch, said: “Mill House is one of the best food-led pub businesses in the market and complements our existing estate, providing scope for synergy benefits and good returns from the outset.” Thorley first held discussions with Kennedy this summer. Sources suggest that Mill House had reached the point where it either expanded by acquisition or sold to a large rival. Punch said it will integrate the Mill House Inns pubs, which currently operate under three trading styles – Mill House Inns, Top Dog and food destination pubs, into the three divisions of Spirit, its managed division. According to Thorley, the Top Dog pubs will by integrated into the company’s Value Food division, which includes the Two for One brand, while the majority of the Mill House Inns and food destination pubs, will be placed in the Premium Food division under the Chef & Brewer brand. Mill House has experienced continuous growth over the last five years. As at July 2006, its unaudited balance sheet had gross operating assets of £147m, with ebitda of £16.2m before central costs and overheads. In March 2005, it was bought by Bank of Scotland Corporate, a unit of HBOS, in a secondary buyout for around £90m. Kennedy first led a £60m management buy-in in 2000, backed by Phoenix Equity Partners.