Heineken Faces Rival in Bid for U.K. Pub Owner Punch Taverns

  • Punch in advanced talks with Heineken over $489 million offer
  • Chain’s co-founder McIntosh seeks funding for higher proposal

Heineken NV is in advanced talks to buy Punch Taverns Plc for 386 million pounds ($489 million), competing with one of the chain’s founders to expand its network of British taverns.

The Dutch brewer may offer 174 pence a share in cash, while Punch co-founder Alan McIntosh’s Emerald Investment Partners Ltd. is considering a 185 pence-a-share bid, although it’s not fully funded, the pub chain said in a statement Wednesday after news of the offers leaked. The stock rose as much as 41 percent, trading between the two bids.

Such a purchase would add 3,300 pubs to Heineken’s U.K. pub business, called Star Pubs & Bars, which controls about 1,100 taverns throughout Britain. Punch shares have fallen 97 percent since a peak in 2007 as U.K. bars struggle with cheaper supermarket booze, a smoking ban and restrictive drinks-purchasing agreements.

“They have said pubs are good for innovation, understanding the customer and that it’s a profitable business,” said Ed Mundy, an analyst at Jefferies.

Punch Taverns joins a growing list of U.K. companies attracting interest from overseas suitors, who are benefiting from a fall in the pound since the June vote to leave the European Union. Others include chip designer ARM Holdings Plc, acquired by Japan’s SoftBank Group Corp., and pay-TV provider Sky Plc, which 21st Century Fox Inc. has approached about a full takeover.

‘Somewhat Off-strategy’

Punch Taverns, which loaded up on debt just as the recession hit and the smoking ban came into effect, hasn’t recorded a fiscal year of revenue growth since 2007. Some analysts questioned why Heineken would want to expand its pub business, as owning taverns is more common among microbreweries than major producers.

“It would look to be somewhat off-strategy,” said Andrew Holland, an analyst at Societe Generale. “It’s a bit of a throwback to the way the U.K. pub industry used to be structured and is not obviously related to Heineken’s global ambition.”

Punch shares traded 38 percent higher at 177.75 pence as of 3:06 p.m. in London. Bidders have until Jan. 11 to say they will make a firm offer or walk away, Punch said.

Heineken and Emerald, formed by McIntosh in 2012, declined to comment.

Punch said there’s no certainty of a firm bid. The company made the announcement after a report by Sky News about the takeover interest, and without prior agreement from Heineken or Emerald.

In 2011, Punch Taverns split in two, separating its managed-pub operations into a new listed company, Spirit Pub Co., that was bought by Greene King in 2014. Punch retained the leased-pub side of the business, and pursued a plan to sell almost half of its 6,000 leased taverns.

Punch, hit by the financial crisis and cheap alcohol at supermarkets, announced the split as debt rose and profits fell.

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