Punch splits in two in bid to lower debt

PUNCH Taverns is splitting its business in two in a bid to tackle its crippling debt pile.

The pubs company is splitting off its managed pubs arm into a company set to be known as “Spirit”, separate from its leased pubs arm to create two individual stock market-listed businesses.

The managed pubs business, which includes Chef & Brewer PubCo, Fayre & Square and Flaming Grill is by far the better performing.

The leased arm will remain under the title Punch PLC.

Shareholders will get a stake in each company if they back the move led by Punch chief executive Ian Dyson.

Dyson said: “We think both businesses have really strong prospects. The managed business has an immediate upside. The leased side has more structural challenges.”

The sell-off of assets “will not be a fire sale”, he said. However, Punch has debts of more than £3bn, putting pressure on the company to make disposals.

The company’s rose 2.3 per cent to 75.25p after the announcement of the shake-up yesterday, which leaves the equity valued at around £450m.

Under the scheme around 2,200 leased pubs will be sold off, at a rate of about 500 a year until the business is halved.

The leased pubs section has taken a hammering as Britons are forced to rein in their spending. Punch even created a team especially to give advice to struggling tenants on how they could turn their pub around.

The ban on smoking has also taken its toll, while few of Punch’s leased pubs offer food – an area where pub companies have seen sales rising.

Meanwhile sales of lager in pubs fell 7.5 per cent last year, according to the British Beer and Pub Association.