Acquisition financing: Punch wins Spirit
Citigroup, Morgan Stanley and RBS finance the UK pub party.
UK public house chain Punch Taverns bought rival Spirit for £2.68 billion ($4.75 billion) in December in a deal financed by Citigroup, Morgan Stanley and RBS. The sale followed an auction involving Robert Tchenguiz’s investment vehicle R20, the Macquarie Group, Robin Saunders’ Clearbrook Capital Partners and the Barclay brothers.
But the highest bidder did not win. Tchenguiz bid about £2.8 billion for Spirit, which comprises some 1,800 pubs. However, Punch’s bid was fully financed so Spirit’s private equity owners, Texas Pacific Group, CVC and Merrill Lynch, had greater certainty that the deal would be completed before the end of the year.
The transaction is something of a homecoming since about 40% of the Spirit portfolio was owned by Punch before its 2002 IPO. At that time Punch sold off its managed estate to focus on tenanted and leased pubs, where it saw more value. Punch will no doubt be pleased with the purchase. John Keane, whole-business securitization analyst at Barclays Capital, believes the outlook for UK pubs is positive given factors such as the World Cup despite the shadow of the smoking ban that overhangs the sector.
Brewers edge back in
The deal was most notable for the fact that R20’s financing included a beer supply agreement with UK brewer Scottish & Newcastle in addition to bank financing by Icelandic bank Kaupthing and Barclays Capital.