MITCHELLS & Butlers (M&B) has announced it is in talks with Punch Taverns to buy the group’s managed pub division, Spirit.
To fund the purchase, M&B, which has a market capitalisation of £1.3bn, is looking to sell just under a 30 per cent stake to one of a few buyers rumoured to be interested.
The purchase would reportedly net Punch Taverns several hundred million pounds, and would be a successful turnaround after talks between the two groups earlier this year failed to come to an agreement on a 50-50 merger.
Three private equity groups, Bain Capital, Permina and a CVC/Blackstone combination, are said to be interested in the 29.9 per cent stake Mitchells and Butler are offering. M&B have reported resilient sales growth, robust operating profits performance and strong operational cash generation, and will open its books to the potential bidders this week.
In a statement M&B said: “The board believes that significant value through enhanced sales and profitability can be created by integrating Punch`s managed pub business into Mitchells & Butlers operational and brand structure.
“The board has now initiated an approach to Punch to explore whether terms for such a mutually beneficial transaction can be agreed.”
M&B currently operate around 2,000 pubs in the UK, Spirit, which Punch bought in 2006 for £2.7b, has about 800 pubs.