Alchemy looks to Regent purchase

Venture-capital firm Alchemy Partners is rumoured to be have approached Regent Inns in relation to a £180m buy-out of the Walkabout operator.

Alchemy already has two companies with sizable high-street operations - Revolution-operator Inventive Leisure and Tattershall Castle Group, which operates Henry's Bar+Café.

Regent saw a strong surge in its share value, up 9.25p to 117.25p on 27 April, after the approach was confirmed. However, Regent insisted talks were at an early stage and that there was "no guarantee that an offer will be made".

Regent unsuccessfully bid for Urbium and Inventive last year. Analysts believe that Regent lacks the size to cope with mounting operational costs - and is extremely likely to be acquired this year.

Analyst Greg Feehely, of Altium Securities, said: "Benefits from an improved liquor margin and the restructuring of central overheads undertaken in 2005 were offset by increases in door security, licensing, utilities and labour costs. Also, certain local authorities have imposed conditions [on] new licences, including the use of poly-carbonates, and a reduction in venue capacity in some sites.

"These have been costly and disruptive to implement and have affected trade. This only serves to reinforce our view that Regent has insufficient scale to weather these above-inflation cost increases when it is unable to grow like-for-like sales at a fast rate. Hence our belief that Regent will get taken over."

A takeout offer of 120p to 130p per share should merit serious consideration from the Regent board. However, Alchemy Partners could probably afford to offer more because of the operational synergies it could achieve from combining Regent with its existing operations.

Analyst Mark Brumby, of Oriel Securities, said Alchemy might be keen to examine its Tattershall sites, all former Spirit pubs, to see whether large sites could be converted to Walkabout and smaller sites lend themselves to Revolution vodka bars. Media suggestions that Robert Tchenguiz may also be interested in buying Regent seem well wide of the mark given that he has largely sold the 10% stake he previously held.