Where else for Rotch?
With Robert Tchenguiz tipped to have won the auction for Laurel, analysts are trying to predict what his company's next high street acquisition will be.
As millionaire property tycoon Robert Tchenguiz is tipped to win the £151m Laurel auction, the City is already abuzz with predictions of his next acquisition.
With consolidation in the saturated high street being widely touted as necessary and inevitable, it is more a question of when, rather than if, Mr Tchenguiz's company Rotch Property Group will move again - assuming Laurel is his.
Ian Payne, current chief executive of Laurel and the man charged with overseeing the sale, said: "Rotch is our preferred bidder, though we are still in talks with all three bidders. Reports which appeared in The Times stating that Robert Tchenguiz has won the auction are a little premature."
However, it is now highly likely that Mr Tchenguiz has beaten both the Yates-owning GI Partners and St James's Place Capital to the prize. He knows Laurel is short of the critical mass needed for long-term survival in the tough high street sector. He is widely predicted to be seeking to merge Laurel, which operates the Hog's Head and Casa chains, with another high street operator.
The flailing Regent Inns, of which the Rotch Property Group holds a 13 per cent stake, is an obvious choice. Mr Tchenguiz is reported to believe a saving of £6m could be made from consolidating the two companies.
However, Regent's shareholders may have other ideas. Regent, which operates the 50-strong Walkabout and Jongleurs comedy brands, recently installed former S&N pubs division chairman Bob Ivell as executive chairman with a brief to turn the company around.
He is unlikely to bow out quietly and Regent has also reported a reduction in its sales decline over recent months. Shareholders may wish to give Mr Ivell more time to overhaul Regent — if only to realise a greater return on a future sale. Both Mr Ivell and his finance director John Leslie have each recently purchased £25,000 of Regent stock.
Another possibility, according to at least one prominent City analyst, is that GI Partners may now throw in the towel, having failed to buy Laurel.
"They may do a quick flip on Yates and sell it to Laurel," he predicted. Yates, like Laurel, most probably lacks the critical mass to go it alone, so GI Partners will either need to hunt for further acquisitions or sell.
Either way, Mr Tchenguiz's re-entry into the pubco sector - Rotch held a sizable chunk of Pubmaster which was sold last year to Punch for £1.2bn - is predicted to be the catalyst to an accelerating domino effect of purchases and sales. The sizeable investments needed to rescue the high street from its downward spiral are increasingly likely to be met by private rather than public sector shareholder investment as the latter will only stomach so much risk.
Alka Bali, director of corporate financing for the leisure sector at Close Brothers, is well positioned to comment, having been behind deals involving Yates, SFI, Spirit and Regent over the past couple of years.
"I'm downbeat about the high street because of too much over-supply and too much discounting," said Ms Bali. "The industry is already fairly consolidated and what are left are mainly low-quality pubs.
"However, with GI Partners and Mr Tchenguiz needing to expand their estates to be viable, they will certainly want to do more high street deals. Regent, Ultimate Leisure, Mitchells & Butlers (M&B), SFI, Urbium and JD Wetherspoon are all suffering and could all potentially be involved in further deals."
A further factor in the future of the high street is that unlike Yates and Laurel, which have a substantial freehold element to their estates, many rival operators are predominantly leasehold and thus not under-written by property value. Only around eight per cent of Regent's estate is freehold, which may increase its vulnerability. Regent, JDW, SFI and M&B were all in "no comment" mode as Mr Tchenguiz' preferred bid status became public knowledge. City sources, on the other hand, were only too happy to say that the high street sector needed radical change. As one bluntly put it: "There needs to be a lot of pain, with cuts made, units closed and sold, and loss-making assets written off."
Mr Tchenguiz, meanwhile, has former Wizard Inns managing director Chris Hutt waiting in the wings to take over from Laurel's chief executive Ian Payne when and if the deal is completed at the end of this year.
Related articles:
Rotch to rule the roost at Laurel (26 November 2004)
