Conversions and pub sales on the cards

If Punch was to merge with Mitchells & Butlers, what would be the strategy?

A few clues emerge from the handling of Spirit in the wake of its acquisition. First, there are the obvious savings from buying efficiencies and crunching two head offices together. Punch sold 400 sites, while converting around 700 managed pubs to lease. Punch boss Giles Thorley believes the next generation of leased pubs have to float down from the managed sector.

Questions have been raised about how many M&B pubs are truly suitable for conversion. But every managed division has its bottom end. M&B already runs a 100-strong tenanted division, which it prefers to call franchised.

Punch's managed division, Spirit, is brand-lite, with Chef & Brewer and Two for One the only obvious M&B-style categories. However, many Spirit sites might lend themselves to conversion to one of M&B's 25 brands and templates. In London, many Spirit wet-led sites trade in a similar fashion to M&B's Nicholson's chain.

Interestingly, M&B chief executive Tim Clarke had made it clear that many of M&B's "category killer" blue-collar formats have been snatching business from the tenanted trade. There is a marked price differential. Pub & Carvery, averaging almost £30,000 a week per site, offers a roast and limitless veg for £3.50.

M&B's model has rested on the idea that it is hurting the tenanted sector. Supporters of the tenanted model will argue that Punch's worst-performing tenanted pubs can be sold while the company focuses on those pubs - managed and tenanted - that can perform in the smoke-free present. An enlarged Punch also provides greater market power for its wholesaling business, Matthew Clark.