Belfast Telegraph

Punch Taverns in £400m takeover tussle with co-founder and Heineken

Pub group Punch Taverns has become embroiled in a £400 million takeover tussle after receiving approaches from its co-founder Alan McIntosh and beer giant Heineken.

Punch, which runs 3,500 pubs across the UK, said private equity group Patron Capital has proposed a 174p-a-share offer, with Heineken set to acquire a stake on completion, while Emerald Investment Partners - led by Mr McIntosh - has put forward a potential bid of 185p a share.

Heineken's approach values the company at around £386 million, with Mr McIntosh's possible offer worth just over £410 million.

Before reports of the bid surfaced, Punch Tavern's market capitalisation stood at £285 million.

Shares in Punch surged more than 40% at one stage as Punch confirmed "advanced discussions" with Patron and Heineken on their proposal, and said it was in talks with Emerald regarding its own bid.

But Punch stressed there can be "no certainty that any firm offer will be made by either Patron or Emerald".

The bidding war pits the Dutch mega-brewer against one of Punch Tavern's co-founders.

Mr McIntosh helped start Punch Taverns back in 1997 and later led its stock market flotation, while serving as chief financial officer in 2002.

He also co-founded private investment group Sun Capital Partners before launching Emerald in 2012.

Heineken's potential bid would expand its presence across the UK - with i ts Star Pubs & Bars business already boasting a portfolio of 1,100 British pubs.

For Punch, the bid interest comes after it recently reported its first annual profit since 2013.

Pre-tax profit came in at £60 million for the 52 weeks to August 20, up from a £105 million loss a year earlier.

Edward Mundy, an analyst at Jefferies, said: "We expect Heineken to exercise capital discipline when considering potential acquisitions, however the market may question the strategic logic of allocating capital to both the UK and pubs, which could be viewed as a defensive move to protect profitability in the UK, (which accounts for around) 6% of group profits."

A takeover of Punch would mark further consolidation in the beers, pubs and brewers market after Budweiser brewer Anheuser-Busch InBev snapped up SABMiller for £79 billion, making it the biggest deal in UK corporate history.

The deal, which was successfully completed in September, followed Greene King's £774 million acquisition of rival Spirit Pub Company in 2015, which created one of the largest pub groups in Britain.

Heineken's potential bid is already facing industry opposition, with the Scottish Licensed Trade Association (SLTA) expressing "grave concerns" regarding a possible deal.

Paul Waterson, chief executive of SLTA said: " It would create a 'monster-tie' ... that would destabilise an already fragile industry.

"A backwards move, it represents bad news for brewers, whose route to market will almost certainly be controlled by Heineken. It also signals bad news for drinkers who will be offered far less choice at the bar."

He added: "In the event of a monster-tie price, quality and service in these pubs are all potentially jeopardised. Competition is crucially important to the on-trade and so we hope that the CMA (Competition and Markets Authority) duly investigates."

It is understood that if a takeover deal is struck alongside Patron Capital, Heineken would take control of 1,940 Punch pubs, while the private equity group would take on 1,330.

It would bring Heineken's total UK pub portfolio to around 3,040.

Mr McIntosh, together with Emerald Investment Partners, currently holds a 2.2% stake in Punch Taverns.