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Allied Backs Whitbread Pub Offer

July 6, 1999

LONDON (AP) _ With names like the Stick & Weasel, the Blind Beggar and Shakespeare’s Head, many of Britain’s pubs evoke the quaint charms of one-of-a-kind watering holes with pedigrees dating back to the age of Falstaff.

But most of these pubs are now part of a very 20th-century creation, national chains owned by corporations like Whitbread PLC and Punch Taverns Ltd.

And Whitbread stands to double the size of its retail empire with the planned acquisition of Allied Domecq PLC’s 3,600 pubs. Allied’s management board urged shareholders Tuesday to accept Whitbread’s offer of 2.86 billion pounds, the equivalent of $4.56 billion, and reject a higher, rival bid from Punch.

Allied, a British food and drinks conglomerate, said it would let shareholders vote on whether they prefer Punch’s 2.93 billion pound, or $4.67 billion, offer. But the Allied board also planned to send them a letter backing Whitbread’s bid.

Punch’s chairman Hugh Osmond has refused to concede defeat, calling Allied’s decision in favor of Whitbread a ``classic example of old boy networks and cronyism.″

Allied wants to sell its pubs to focus on its other businesses, which include some of the world’s best-known liquor brands, among them Beefeater gin and Canadian Club whiskey. It also owns the Dunkin’ Donut and Baskin-Robbins ice cream chains.

Like the aftertaste of a good British ale, the pub war looks set to linger a while.

The Allied board’s surprise decision follows weeks of acrimonious bids and counterbids between Punch and Whitbread. The board announced its choice after a meeting that began late Monday, after Punch raised its bid a second time.

In a statement, Allied said its board was swayed by the fewer risks and shorter timetable of a Whitbread takeover, and the fact that Punch’s offer depended upon a complex financing plan.

Allied plans a special shareholders meeting to consider the proposed sale to Whitbread. The sale still must be approved by the Office of Fair Trading.

Allied’s announcement took many investors by surprise. Allied was widely expected to approve the Punch bid, and Whitbread shares had fallen Monday on this expectation.

On Tuesday, Whitbread’s shares rose 1.4 percent to the equivalent of $15.98 a share, while Allied stock fell 2.7 percent to the equivalent of $9.71 per share. Punch is closely-held and its shares aren’t publicly traded.

``If you had asked me yesterday, I would have said it looks like it’s going Punch’s way,″ said Stuart Forshaw of the brokerage Charterhouse Securities Ltd.

Punch launched the bidding war, making a rival cash offer for Allied’s pubs last month after Allied already had agreed to sell them to Whitbread for 2.3 billion pounds, or $3.68 billion, worth of Whitbread shares.

Brewery group Bass PLC supported Punch’s bid, agreeing to buy 650 of the pubs from Punch if the bid succeeded. Among Punch’s financial backers were American venture capital firms Texas Pacific Group and Soros Private Equity Partners.

On Friday, Whitbread sweetened its bid, offering 53 percent of its price in cash and 47 percent in shares. Punch countered on Monday with a higher offer that included an option of 25 percent of the purchase price in Bass shares.

Allied said Tuesday a deal with Punch, if approved, would be unlikely to be completed before mid-October, due to an exclusivity arrangement between Allied and Whitbread.

Punch chairman Osmond said his company would take its case directly to Allied shareholders. ``If necessary we’ll bypass the Allied board,″ he said.

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