Heineken is poised to win Punch Taverns' hand in takeover battle

 
Courtney Goldsmith
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Heineken is poised to buy UK pub operator Punch Taverns (Source: Getty)

Punch Taverns today agreed to a £403m offer from Heineken and its investment partner Patron Capital. The Dutch brewing giant has until mid-January to make a firm offer.

The current offer will lapse if a competing bid of 200p or more is made.

Heineken and its partner Patron are facing competition from Alan McIntosh and his Emerald Investment Partners, which lost out yesterday but may yet make another offer, City A.M. understands. He first has to arrange financing.

A source said, “He’ll come back when he’s ready.”

Under yesterday’s offer, agreed by the board and Punch’s three largest shareholders, will add 1,900 pubs to its current portfolio of 1,049 Star Pubs and Bars. This will give it roughly six per cent of the total pub market. Patron Capital's Vine Acquisitions will acquire and run Punch Taverns’ remaining 1,329 pubs.

Each Punch shareholder will receive 180p in cash, 40 per cent up on Punch's closing price of 128.5p Tuesday.

Punch's top three shareholders – Glenview Funds, Avenue Funds and Warwick Funds – and the Punch directors, representing 52.3 per cent of the existing ordinary share capital of Punch, agreed to terms that any new offer below 200p cannot be considered.

The offer values Punch at around £402.7m, with Heineken contributing £305m to the total. The offer is fully financed.

Following the announcement, Punch Taverns’ shares increased more than eight per cent to 191.25p before falling back to 191p at the market close.

The transaction is subject to approval from Punch shareholders and regulatory authorities.

The Punch directors intend to unanimously recommend Punch shareholders vote in favour of the transaction.

On completion of the transaction, Heineken UK will integrate Punch's pubs into Star to become the third-largest pub business. This has raised competition concerns among market commentators. The deal is expected to be completed by the end of the first half of 2017 barring any complications.

Stephen Billingham, chairman of Punch Taverns, told City A.M. “The deal is good for Punch’s shareholders as it represents a significant premium to where shares have been trading in 2016.”

Yesterday morning, City A.M. revealed McIntosh, who was one of Punch Taverns' founders, tabled a cash proposal of 185p per share for the pub company.

Punch is being advised by Goldman Sachs, while Heineken is being advised by Nomura.

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