Punch rejects M&B move for Spirit

Punch Taverns has firmly rejected the approach by Mitchells & Butlers (M&B) for the managed Spirit pub operation.

Punch, the UK's biggest managed pub operator, has also ended all discussions with private equity groups which might have revived its own plans for a merger with M&B.

In a statement to the stock exchange, Punch said "pursuing any transaction with Mitchells & Butlers, including any transaction involving Punch's managed pub business, would not be in the best interests of Punch shareholders at the current time."

It added that "all such discussions have terminated".

In March, Punch withdrew its proposal for a merger with M&B, but said it had been approached by a number of third parties in relation to "possible transactions" involving M&B.

Earlier this week, M&B confimed that it had approached Punch to try and explore suitable terms for a deal which would add the 800-plus Spirit business, which includes the Chef & Brewer chain, to M&B's own 2000-strong managed pub business.

Sources close to Punch said that all discussions with potential private equity partners in a deal had now been ended. While many people could see the logic of a combined Punch and M&B, it had not been possible to come up with a model which would add sufficient value for Punch shareholders.

Under City takeover rules, Punch is now excluded from making any offer or approach to M&B for six months, unless another potential bidder emerges.

Analyst Mark Brumby of Blue Oar Leisure said that, given the fact that a Punch/M&B merger made sense to the City, "this is not good news for anyone. To blame personalities is tempting but perhaps wrong, the truth is worse than that - there is a very restricted, or no, market for debt and deals cannot be consummated."