Punch Taverns is to split its business in two and sell thousands of pubs as part of a major overhaul of the firm. Punch, the UK’s biggest pubs group, said it would split its managed and leased pub operations to create two new public companies.
The size of the leased business will be halved to about 3,000 pubs.
The managed side will be named Spirit, with some pubs changed to existing brands such as Chef & Brewer, Fayre & Square and Flaming Grill.
Punch Taverns has been struggling with falling profits and rising debt, which hit £3.3bn last year.
Its shares rose 4% following the announcement, and ended the day 2.3% higher.
Punch Taverns announced last October that under its new Chief Executive, Ian Dyson, it had started a comprehensive review of the Group’s strategy, operating performance and capital structure. Punch is today announcing the outcome of this review.
Review Headline Conclusions
* Operating momentum in both the Managed and Leased businesses provides a solid foundation for the strategic review
* The Group’s current strategy is not sustainable with structural change required to drive value
* The Managed business requires investment and development to accelerate its operational turnaround and drive growth
* The Leased business needs to be repositioned to maximise the long term value within the estate by downsizing to a core of around 3,000 high quality pubs
* There are limited synergies between the Managed and Leased businesses
* The Group’s structure and financial position are barriers to realising value
* Separation of the Managed and Leased businesses
* Achieved by the demerger of Spirit from Punch and the creation of two independent public companies
* Demerger expected to be completed before the end of the summer
Commenting on the strategic review Ian Dyson, Chief Executive, said: “Change at the top of an organisation and a strategic review can provide a distraction from day to day operations and I am proud that this has not been the case at Punch. Our Q2 trading statement clearly shows that we have continued to build operating momentum over the last six months and this provides a solid foundation for our strategic review.
We believe that 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 that 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. Spirit will be positioned to deliver market leading sales and profit growth and to expand with the aim of becoming 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.”