Pubs prey

22 May 2003

The UK pubs group has probably seen off predators by gearing itself up. Its latest promise is to disgorge another £400mplus. It is clearly tempted by the prospect of buy Scottish & Newcastle’s pub estate. But it’s only worth doing if the price is good.

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Mitchells & Butlers is interested in buying Scottish & Newcastle's pub estate, according to people familiar with the situation.

M&B said it was not in talks with Scottish & Newcastle, which put the estate up for sale last month, and that its priority was refinancing its existing pubs business. It said it would only bid for the S&N estate if it delivered with certainty greater value. Even so, the group believes there could be considerable synergies from merging the two estates, according to the people familiar with its thinking.

M&B said it would return at least £400m to shareholders in the autumn through a securitisation of assets arranged by Royal Bank of Scotland.

The securitisation is expected to involve replacing M&B's existing £1.3bn of debt with a new £1.7bn package. The new debt is expected to have an average maturity of 1520 years and pay interest at about 6%. The group's net debt to ebitda ratio would rise from 3.5 times to just under 5 times.

M&B received and rejected a £2.8bn bid approach from private equity group BC Partners in April.

M&B's turnover increased 1% to £793m in its interim results for the 28 weeks ended 12 April 2003. The group's net cash flow increased to £152m and earnings per share fell 0.7p to 8.6p.

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