Punch seeks merger with Mitchells& Butlers

February 4, 2008: Punch Taverns has confirmed today that it has submitted outline terms of a possible merger with troubled pubco Mitchells & Butlers. The approach was made on Friday.

If such a deal went ahead it would create Britain's biggest pubco, worth £11 billion.

Mitchells & Butlers has been forced into talking to potential partners after it closed a disastrous hedge fund venture linked to a property deal, which cost it £274 million before tax. It also led to the resignation of finance director Karim Naffah.

Punch's proposal envisages a merger after which each firm’s shareholders would each own 50% of the merged. In addition, Mitchells & Butlers shareholders would receive a cash payment of £175 million.

The proposal includes plans for a management and board structure for the
combined company with Giles Thorley as chief executive, Phil Dutton as chief finance officer, Tim Clarke as non-executive chairman and Peter Cawdron as non-executive deputy chairman. Remaining the senior executives and board members would be drawn from both.

In its statement today, Punch Taverns said: “Punch believes the terms and structure of the combination are compelling to both Punch and Mitchells & Butlers shareholders, and that there is substantial strategic rationale in combining the two businesses, including opportunities for operational synergies in the managed pub business and through a reduction in central costs. Punch believes that its proposal is attractive in terms of value, speed and deliverability.”