Punch announces demerger as it seeks to recover debt

MIDLAND pubco Punch Taverns has announced details of a major shake-up as it seeks to overcome a massive £3bn debt.

Under the plan announced today, the Burton-upon-Trent business will be split into two separate companies based around its managed and leased pub divisions. The new businesses will be listed as separate companies and the demerger is expected to be completed before the end of the summer.

Following the demerger, hundreds of poorly performing pubs could be sold off to raise cash for debt repayment.

Punch chief executive Ian Dyson said the current business had become unsustainable and a radical restructuring was necessary if it was to survive.

The restructure follows a review of the company’s activities, orchestrated by Mr Dyson last autumn.

The review has concluded that the operating momentum in both the Managed and Leased businesses provides a solid foundation for change. Also, the current Managed business requires significant investment and development to accelerate its operational turnaround and drive growth.

The Leased business needs to be overhauled to achieve long term value and this could be achieved by downsizing the estate portfolio to around 3,000 pubs.

The review accepts there will be limited synergies between the managed and leased businesses and that the group’s current structure and financial position are barriers to achieving best value.

Mr Dyson said: “Our Q2 trading statement clearly shows we have continued to build operating momentum over the last six months and this provides a solid foundation for our strategic review.

“We believe there is a significant value creation opportunity at Punch, with immediate upside in managed and longer term upside in leased. We do not believe that either opportunity can be maximised within the current group structure and accordingly, we propose the two businesses be separated.

“This will be achieved by the demerger of Spirit and the creation of two independent public companies. A demerger will provide the platform to enable both businesses to focus on the very different strategies required to deliver shareholder value and will provide choice and liquidity for investors.”

Under the plan, Spirit will be positioned to deliver market leading sales and profit growth. The ultimate intention is to become the UK’s leading managed pub operator.  

“Punch will be positioned to drive long term value by downsizing to a core estate of around 3,000 pubs with the aim of becoming the UK’s highest quality and most trusted leased operator,” added Mr Dyson.

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