Pubmaster goes fourth

John Sands has just bought Inn Partnership, making Pubmaster the fourth biggest landlord in the UK. Mark Stretton reports.

A bleak, grey Monday morning at a motorway service station near Coventry is not many people's idea of fun, but there is nowhere John Sands would rather be.

The executive chairman of Pubmaster has just captured 1,200-strong Inn Partnership, and has stopped en route for a coffee and a cigarette before visiting his new West Midlands-based troops.

The £489m deal, which made his company the fourth largest landlord in the UK pub market, seemed to be a long time coming. Everyone thought it was happening, but the question was when. The original completion date target of January 16 came and went and an agreement was announced three weeks later. "We are very pleased to have done the deal," he says, pausing for a drag. "I have never been involved in a deal that has been completed on time - it's just the nature of the thing."

Pubmaster quickly emerged as the favourite to win the race for Inn Partnership when it was put up for sale at the back-end of last year.

John and his advisors started working on the deal at the beginning of December. This meant that every single pub in the 1,200 Inn Partnership estate had to be visited and assessed. A team of 50 completed this task in just over two weeks. "We visited every pub as a mystery visitor," he says. "Each pub was assessed on how a customer would see it and that visitor would take a photo and compile a two-page report.

"Once that was done we undertook legal and property due diligence and then finally got to the banking."

US investment bank Lehman Brothers helped with financing the deal and is now in talks with Pubmaster to acquire a 10 per cent stake. "It originally helped us with some of the debt," John says. "But now it wants a bit more - it sees us as a good investment."

The company is majority backed by the principal finance unit of WestLB. John describes his relationship with the German bank as "excellent". There did seem to be a difference of opinion over the value of the deal. On completion Pubmaster announced the value was £489m and the figure that had changed hands was £523m, allowing for £34m cash left in the business by Nomura. By way of reply a Nomura spokesman said: "They can dress it up how they like, but they paid £523m."

John doesn't quite see it that way. "Cash is cash," he says. "The fact is we paid £489m for the business, which was below the original asking price of £500m, and we are very happy with that price.

"Now it's just a matter of making the damn thing work," he says, bursting into laughter.

John hopes to have completed the integration of Inn Partnership within six months. Half the estate is on lease and half is on the shorter-term franchise agreement. "Every pub is different," he says. "We will deal with each pub on an individual basis and some will remain on the franchise deal - it's whatever fits best."

He says the overall estate is exceptional - high quality pubs and well looked after. "The Inn Partnership estate is a very good fit, geographically. We now have a high-density in the west country and lots of great opportunities," he says.

The Pubmaster man has a reputation as one of the most aggressive predators in the industry, an image not entirely deserved, he thinks. "Much of that came from when we tried to buy Wolverhampton & Dudley Breweries (W&DB) in the summer because we were the only group prepared to go hostile on the bid."

John says he was naturally very disappointed to lose out on W&DB. "We did an awful lot of work and we just missed it by a smidgeon. I think we offered a very full price." Wolves didn't agree but John says he was not going to stunt the development of the business by overpaying.

He says the company focuses on buying "quality not quantity". "The group could easily have reached 5,000 pubs by now if we had bought crap," he says. "If you buy rubbish you spend the rest of your life regretting it.

"I would spend almost more time selling pubs than I do buying them."

Testament to the chairman's "quality not quantity" mantra is his deal strike-rate. In the past four years John and his management team have looked at 15 businesses as potential acquisition targets yet have completed on just four. "I enjoy doing transactions but we're very conscious not to become deal driven," he says. "We only tend to do one major deal a year. We know what we're looking for. Once we decide we have found it we try to pull out all the stops."

The executive chairman says people and staff are also factored in to his decision. "You have to consider how the people in a company will be affected and how they will fit into our current business," he says.

"There is also a lot of fear surrounding a takeover - people are afraid of change and suddenly the future is not so clear." He sees today's visit to Coventry as a chance to reassure his new charges. "We are not going to make any rapid changes - there's a long process ahead."

After the exhausting and gruelling bid process, doesn't he feel like a bit of a breather? "That's the fun of it," he says. "This is why we do it."

When John does finally find some time for himself away from Pubmaster, he is often to be found down the pub - in his spare time he will visit at least three a week.

He also plays the guitar in a rock band and is a mad Newcastle fan, one of the 52,000 Geordies regularly to be found in the stands when the Magpies play at St James' Park.

"I used to keep fit," he says, "but that went out the window with the W&DB thing. Everytime we do a transaction my smoking increases. It's not nerves, I'm just sat about in offices waiting for things to happen and smoking."

He also has a passion for sailing, but not on the River Tyne. Together with his wife Susan, he regularly visits his holiday home near Montpellier in the south of France.

The Pubmaster maestro says he learned more about business when he was managing director at the ailing Brent Walker Inns than at any other time. "Every Friday afternoon I would sit down and work out what suppliers were going to get paid," he says. "It's then that you realise the main issues and concerns of a business. I'm not cautious but I am careful."

The Brent Walker parent company went bust, its banks took control of the pubs business and relaunched it as Pubmaster. John kept the top job and five years later led a £171m management buy-out backed by NatWest and PPM Ventures. He invested £170,000 of his own cash.

Within two years the company was sold again to the consortium led by WestLB. The price was never disclosed but John's original investment rolled over and he now holds about 4.5 per cent of the equity.

The Pubmaster chief knows what it is to fail, but for the last 10 years he has been winning. He is now off to Coventry to welcome and brief his new employees in the next phase of the Pubmaster story.

"If I had told people in 1991 that we would turn this business round and be where we are today, they would have thought me mad. There's nothing like building success from failure," he says.

Related stories:​

Pubmaster lands Inn Partnership (7 February 2002)

Pubmaster closes Inn on £500m Nomura pubco (30 January 2002)

Boardroom shake-up at Pubmaster (21 January 2002)

Pubmaster favourite to win Inn Partnership (10 January 2002)

Pubmaster leads chase for Inn Partnership (13 December 2001)

Enterprise Inns in talks over proposed sale of Inn Partnership (29 November 2001)

Nomura puts Inn Partnership up for sale (12 November 2001)

Pubmaster fails to buy W&DB (13 August 2001