Pub prices and the valuation gap

When Punch Taverns revealed it would be prepared to consider selling pretty much each and every one of its 7,500-plus leased pubs to their incumbent lessees I expect there was much pressing of calculator buttons on bar tops across the country.

Roger Whiteside, the new man at the helm of Punch's leased pub business, had earlier outlined that the pubco would be opening a "window of opportunity" whereby if the right deal could be reached and if it was appropriate for both lessee and pubco then Punch would be happy to sell.

With the availability of finance currently one of the thorny issues for anyone looking to buy a business, pub or otherwise, this may not seem like a hugely enticing offer. But there are still some people who have a fair old amount of cash stashed away and are prepared - as long as the price is right - to spend it, even in this environment.

After all, pub prices are not what they once were. Are they?

So I thought I'd regale you with this example of how perception can play an important part in the outcome of an offer like Punch's.

One Punch lessee contacted me last week to say he'd had his pub independently valued and been told an asking price of £500,000 for the freehold should be expected.

When the lessee contacted Punch, the operator came back with its own valuation: £1.3m. A bit of a difference, I think you'll agree.

What, the lessee who had contacted me wanted to know, did this say about the rest of Punch's estate?

If even half of the operator's pubs were overvalued to the tune of 160 per cent, he asked, what would this do to its overall asset valuation and how this stacked up against its £4.6bn-plus of debt?

What indeed?