8th Jun 2006 13:52
Punch Taverns PLC08 June 2006 PUNCH TAVERNS PLC("Punch" or "the Group") PROPOSED DISPOSAL OF 290 MANAGED PUBS BY PUNCH TAVERNS PLCTO GI PARTNERS The board of Punch Taverns plc ("Punch" or the "Group") today announces that ithas agreed to the disposal of 290 managed pubs (the "Disposal Portfolio") fromthe Spirit Group ("Spirit") to Orchid Pubs Limited, a company formed by GIPartners (the "Disposal"). Highlights • Proceeds from the Disposal, on a cash and debt free basis, of £571 million • The disposal of 290 pubs forms part of the planned disposal of 380 pubs announced with Punch's interim results on 22 May 2006 • Cash proceeds to be used primarily to reduce short term debt The Disposal will be subject to Punch shareholder approval if required. Giles Thorley, Chief Executive of Punch, commented: "The transaction represents the first major disposal by Punch following theacquisition of Spirit in January 2006 and is wholly in line with our strategy tostreamline the managed house business whilst converting a further 740 pubs toour core leased estate". 8 June 2006 ENQUIRIES Punch Taverns plc 020 7868 8903Giles ThorleyRobert McDonald Merrill Lynch International (Punch's financial adviser) 020 7628 1000Simon Mackenzie-SmithPeter Tracey College Hill (Punch's PR) 020 7457 2020Justine WarrenMatthew Smallwood GI Partners 020 7399 9614Phil Kaziewicz JPMorgan Cazenove (GI Partners' financial adviser) 020 7588 2828Duncan HunterVictoria Bell Citigate Dewe Rogerson (GI Partners' PR) 020 7638 9571Patrick DonovanSarah Gestetner Merrill Lynch International is acting as financial adviser and corporate brokerto Punch in connection with the Disposal. JPMorgan Cazenove is acting as financial adviser to Orchid Pubs Limited and GIPartners. This summary should be read in conjunction with the full text of the attachedpress release. Merrill Lynch International is acting exclusively for Punch in connection withthe Disposal and no one else and will not be responsible to anyone other thanPunch for providing the protections afforded to clients of Merrill LynchInternational or for providing advice in relation to the Disposal or any othermatters referred to herein. JPMorgan Cazenove is acting exclusively for Orchid Pubs Limited and GI Partnersin connection with the Disposal and no one else and will not be responsible toanyone other than Orchid Pubs Limited or GI Partners for providing theprotections afforded to clients of JPMorgan Cazenove or for providing advice inrelation to the Disposal or any other matter referred to herein. 8 June 2006 PROPOSED DISPOSAL OF 290 MANAGED PUBS BY PUNCH TAVERNS PLC TO GI PARTNERS 1. Introduction The board of Punch Taverns plc ("Punch" or the "Group") today announces that ithas agreed to the disposal of 290 managed pubs (the "Disposal Portfolio") fromthe Spirit Group ("Spirit") to Orchid Pubs Limited, a company formed by GIPartners (the "Disposal"), for total proceeds, on a cash and debt free basis of£571 million, payable in cash. The Disposal will be subject to Punch shareholder approval if required. 2. Background to and reasons for the Disposal In line with Punch's previously announced strategy following its acquisition ofSpirit, the Group intends to transfer a significant number of Spirit managedpubs to its leased estate to be run by entrepreneurial independent retailers.The Group has committed to transfer 740 managed pubs to its leased estate andthe first two phases of this process are now underway with over 450 Spirit pubsnow announced for transfer to lease. Following the Group's review of its managedestate it is anticipated that Punch will dispose of approximately 410 of thepubs originally acquired as part of the Spirit acquisition (including theDisposal Portfolio). These pubs have been selected for disposal after carefulreview, on the basis of current and prospective trade and their fit within theremaining estate. To date, approximately 30 pubs have been sold. The remaining estate of 680 pubs (the "Retained Estate") constitutes a qualitymanaged pub estate, which is streamlined and less complex to operate, and whichwill be managed through three divisions of Value Food, Premium Food and QualityLocals. The Premium Food division will include the Chef & Brewer brand. TheRetained Estate is 68 per cent. freehold or long lease with an average outletEBITDA of £231,000 per annum and a strong growth profile. Punch's intention is to establish the Retained Estate as a high quality managedhouse estate, run as a separate business within Punch and managed by anexperienced team drawn mostly from the Spirit management team. Whilst drivingtowards this simultaneously with the lease conversion programme, Punch issuccessfully building valuable quality assets in both its leased and manageddivisions. 3. Information on the Disposal Portfolio The Disposal Portfolio comprises 290 managed pubs, including a number of pubsbranded under the Country Carvery, Q's and Bar Room Bar formats. The remainingpubs are being sold on an unbranded basis. For the unaudited 52 week period to22 April 2006, the pubs generated revenues of £230.7 million (equivalent to anaverage weekly turnover of approximately £15,300) and outlet level EBITDA (i.e.before central overheads) of £60.6 million. The assets are located across the United Kingdom, with 136 in the south ofEngland and Wales, 133 in the north of England, and 21 in Scotland. 184 of theassets are freehold; 10 are held on long leasehold arrangements; and 96 on shortleaseholds. 4. Principal terms and conditions of the Disposal Pursuant to a disposal agreement, Punch has agreed to sell the DisposalPortfolio to Orchid Pubs Limited, a company formed by GI Partners. The total proceeds of £571 million on a cash and debt free basis (subject toadjustment for certain matters including, inter alia, working capital) will bepaid by way of consideration for the transfer of shares of certain companies andthe sale of certain pubs from Spirit Managed Pubs Limited and the discharge ofindebtedness owed to subsidiaries of Punch. The Disposal will be subject to Punch shareholder approval if required. 5. Financial effects of the Disposal on Punch As at 20 August 2005, the outlets forming the Disposal Portfolio were includedin Spirit's accounts with a fixed asset value of £446.0 million and currentassets (comprised of stocks, cash floats and prepayments) totaling £5.5 million.These are the only net assets that are separately attributable to the outletsforming the Disposal Portfolio. The remaining assets and liabilities connectedto this portfolio (being primarily other debtors, trade creditors, accruals,provisions and debt funding) are not separately identifiable by individualoutlet as they are an element of larger balances held that either relate tooutlets within the continuing group as well as the Disposal Portfolio (e.g. thebeer creditor, which relates to the entire managed estate) or are not directlylinked to an outlet (e.g. external debt funding and associated accruedinterest). The net cash proceeds arising from the Disposal are expected to be approximately£560 million which will be primarily used by Punch to repay short term debt. On acquisition of Spirit in January 2006, Punch assigned provisional fair valuesto the assets now forming the Disposal Portfolio. These values will now beadjusted to eliminate the book profit or loss on disposal in the Group accounts,resulting in a change to provisional goodwill arising on the acquisition ofSpirit. 6. Current trading and prospects for Punch In Punch's interim results announced on 22 May 2006 for the 28 weeks ended 4March 2006 the following statement was made regarding current trading: "The past six months have been a period of steady progress for the underlyingestate whilst we have successfully moved the Group into a new dimension with theacquisition of Spirit. With this acquisition we have significantly improved thequality of our estate and gained the capacity and skills to develop our businessfurther. While the trading environment presents some ongoing challenges, our strategy ofacquisition, divestment and investment continues to improve the quality of thepubs in our estate. Moreover our management team has the strength and range ofskills to continue to move the business forward. The second half has started well and continued the steady pattern of the firsthalf. We look forward to an active programme for the remainder of the year and asatisfactory outcome with enhanced prospects for continued future growth." Since the date of the above statement there have been no major changes intrading, which remains in line with expectations. Merrill Lynch International is acting exclusively for Punch in connection withthe Disposal and no one else and will not be responsible to anyone other thanPunch for providing the protections afforded to clients of Merrill LynchInternational or for providing advice in relation to the Disposal or any othermatters referred to herein. JPMorgan Cazenove is acting exclusively for Orchid Pubs Limited and GI Partnersin connection with the Disposal and no one else and will not be responsible toanyone other than Orchid Pubs Limited or GI Partners for providing theprotections afforded to clients of JPMorgan Cazenove or for providing advice inrelation to the Disposal or any other matter referred to herein. Certain statements made in this announcement are forward-looking statements.Such statements are based on current expectations, and by their nature, aresubject to a number of risks and uncertainties that could cause actual resultsand performance to differ materially from any expected future results orperformance expressed or implied by the forward-looking statement. Theinformation does not assume any responsibility or obligation to update publiclyor revise any of the forward-looking statements contained herein. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Punch Taverns PLC