Punch Taverns to sell 3,000 pubs

Punch Taverns chief executive Ian Dyson said that the company’s current structure is unsustainable Pub chain Punch Taverns has unveiled plans to split its heavily indebted business in two and hive off almost 3,000 pubs. By demerging its managed pubs from its leased estate, Punch hopes to finally get to grips with the £3bn debt pile that has helped to destroy 95% of the company’s value in the last four years. Chief executive Ian Dyson admitted on Tuesday morning that Punch’s current structure is unsustainable. The company plans to demerge Spirit, the managed pubs division that includes brands such as Chef & Brewer and Bar 38. This will leave Punch with almost 6,000 tenanted pubs which it rents to landlords. It will then sell around 500 of these leased pubs per year, until it is left with a core estate of 3,000 sites. “A demerger will provide the platform to enable both businesses to focus on the very different strategies required to deliver shareholder value and will provide choice and liquidity for investors,” said Dyson, who joined Punch from Marks & Spencer last year. Dyson believes that Spirit will enjoy an immediate fillip once it is released from the shackles of Punch, whose future has been threatened by its debt mountain. Rebuilding the leased pubs arm will take longer, he said. The plan will need the approval of Punch’s bondholders, and Dyson said this morning that he “needs to engage” with them with a view to “optimising the capital structure”. It is not clear how receptive bondholders will be to such negotiations. Punch has reported encouraging financial results in recent months . However, the industry is experiencing a tough time, with cheaper alcohol from supermarkets encouraging thrifty drinkers to stay at home. The company believes that this trend will continue – forecasting a 3.1% per year decline in drinking out in pubs over the next five years. In contrast, it expects the market for eating out in pubs to increase by 3.5% over the same period. Punch grew rapidly through the last decade under former chief executive Giles Thorley. He funded this expansion by borrowing against Punch’s property assets, a process known as securitisation. Thorley was hailed by the City as one of its brightest stars, but Punch’s fortunes crashed as the credit crunch struck. Thorley resigned nearly a year ago , following a £375m rights issue that kept the company running. There had been predictions that Punch might simply hand its leased estate to its bondholders. Dyson said he had considered it, but concluded it was not in anyone’s best interests. “It would remove the opportunity to create equity value in the leased business and would negatively impact the management, operation and valuation of the entire group,” he said. Having peaked at almost £14 in May 2007, shares in Punch fell as low as 35p in early 2009. They rose 2.1p in early trading on Tuesday, to 74p. Punch Taverns Food & drink industry Graeme Wearden guardian.co.uk

Posted by on March 22, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.