Punch Taverns withdraws M&B merger plans

Punch Taverns has given up on its ambitious plan to merge with Mitchells & Butlers.

The group said this morning that discussions "have led the board to conclude that the terms proposed to Mitchells & Butlers are no longer in the best interests of Punch shareholders and therefore Punch is withdrawing its merger proposal".

Punch said it "has been approached by a number of third parties in relation to possible transactions involving Mitchells & Butlers which may or may not result in an offer for, or other transaction with, Mitchells & Butlers.

"Punch is assessing whether any such proposal would maximise value for Punch shareholders. A further announcement will be made in due course, if appropriate."

It is understood that among other things Punch was concerned about aspects of M&B's financing, notably its pension fund.

A number of City analysts have questioned M&B's cash position, concerns the group has firmly rebutted.

Mark Brumby of Blue Oar Securities said: "It doesn't look as though anybody comes out of this smelling of roses. The feeling that somebody was dragging their feet began to pervade a few weeks ago. That body was likely to be M&B and, if they wished to drive away bidders then it would look as though they may have succeeded.

"Whether that is a good thing or not remains to be seen. A break-up bid for M&B remains a possibility but, if it involves Punch, it will be on less favourable terms and, though M&B possibly 'should' be taken over, the question is by whom?"

Punch's shares this morning rose 26.5p to 545p, while M&B's shares fell 14.5p to 315p.