Property entrepreneur Robert Tchenguiz is reportedly amassing a private equity army to do battle with Punch Taverns in a race to acquire its rival Mitchells & Butlers, the UK pub chain that reported losses of £422 million ($840 million, €565 million) on Wednesday due to its failure to close a lucrative property deal last year.
Tchenguiz said last week he is preparing to increase his stake in Mitchells & Butlers from 23 percent to 29.9 percent, and he is now reportedly leading an effort for the group to be acquired by a private equity firm. Apax Partners, Cinven, CVC Capital Partners and Permira are all reportedly making approaches. An offer has also been made by the company’s arch rival Punch Taverns, according to reports. However Tchenguiz is thought to be increasing his stake in order to back one of the private equity groups making a bid.
Tchenguiz himself was responsible for the calamitous property deal attempt that caused the company’s losses. He had planned alongside an M&B subsidiary to acquire £4.5 billion of the group’s freeholds in a heavily debt-financed deal. That effort fell through, leaving both M&B and Tchenguiz with substantial losses from closing hedging positions that had been designed to underpin the deal.
M&B’s current share price is at 72p, valuing the business at £1.9 billion with net debt of about £2.8 billion.
Some analysts have speculated that Punch may be planning to turn the freehold property owned by M&B and Punch into a real estate investment trust (REIT). Such a combination would give the merged company a collection of 10,300 pubs.
But private equity money still remains a fierce competitor to Punch. Along with the firms making direct offers, analysts are also suggesting an offer may come from restaurant group Whitebread and Tragus, which is backed by Blackstone.