M&B and GIP prepare to go head to head

As predicted the biggest issue for the bankers appointed to sell 235 pub restaurants on behalf of Whitbread has proved to be crowd control. That crowd is thought to include: Alchemy Partners, which owns the Inventive Leisure and Tattershall Castle pub businesses, and was an under-bidder in the recent sale of 290 pubs to GI Partners (GIP); Unsurprisingly GIP is there as it aims to build on its acquisitions, which also include the Noble House restaurant business; Mill House Inns, a surprise bidder, which is backed by Bank of Scotland Integrated Finance; Mitchells & Butlers, Britain’s biggest pub and restaurant retailer; and Wolverhampton & Dudley, the acquisition brewer and pub group. It is not clear what other groups are there although Enterprise Inns is not among them, nor is Greene King. It is also unclear if Punch has lodged a preliminary offer. The company has many pubs that sit next to a Premier Travel Inn, which raises the prospect of a deal involving site swaps. But the real surprise is that R20, Robert Tchenguiz’s pub vehicle, is not in this process. R20 just missed out to GIP and the acquisitive group was expected to participate this time. When I asked Tchenguiz why the group was not involved he said: “We keep on buying things. We have spent 18 months buying things and we need to focus people on the business we have got. “Also, there is a lot of interest in this portfolio. We don’t want to spend four months in this process for someone else to come in and pay £100m over the price.” That sounds like a genuine change of tack. Some industry observers – and rival operators – have long suggested that a keener focus was needed on the high street pub group Tchenguiz has built through Laurel. Not having the distraction of ongoing deals will help. The Whitbread assets in question, practically all freehold, produce underlying profits (before central overheads) of about £49m. The profits are said to be going backwards and sources suggest that on the current trend, the number will be nearer to £40m in 12 months. If the price matches the pre-overhead multiple paid for Spirit of 7.8x, it will be sold for just short of £400m, or based on a forward ebitda multiple, £320m. In reality the price will be much higher. Although first-round bids are not necessarily indicative of where the final price will end up, M&B is said to be leading the pace with a proposal of almost £550m. The group led by Tim Clarke clearly believes it can add substantial value through applying its own restaurant brands. It will be fascinating to watch the situation unfold. It seems certain that M&B and GIP will be there, or thereabouts. As for Whitbread, it has taken another step out of its brewing and pub-retailing heritage, toward a brave new world as an international leisure brand operator. With the prospect of the sale of its high street restaurant brands also looming, Whitbread’s future is centred on PTI and Costa Coffee.