Equity funds 'will pounce on pubcos'

A leading financial adviser is predicting a flurry of acquisitions or mergers in the wake of TDR Capital buying 333 pubs from Mitchells & Butlers.

Mark Sheehan, managing director of Coffer Corporate Leisure, said: "The pub

sector is seen by outside investors as a sector which offers tremendous opportunity for the bold.

"It is interesting that the latest deal was not undertaken by a trade buyer or an existing investor in the pub or wider leisure sector.

"What is significant is that TDR Capital has made huge returns in the past from Punch (as founding investor with Hugh Osmond) and from Pizza Express, which it took private in June 2003."

Sheehan continued: "There are many pub equity funds sitting on cash and ready to buy. What has stopped them in the past is the scarcity of debt and a shortage of willing sellers at realistic prices."

In addition to traditional private equity, there is Osmond's vehicle, Horizon, which is looking for a £1bn purchase. Furthermore, a number of real-estate funds that have raised money over the past three years are itching to invest in property-backed investments.

Sheehan thought the banks that control a number of pub groups could be

considering selling their interests and "buyers are ready to pounce".

He said freeholds in the south-east are already achieving premium prices.

Sheehan added: "The next deals will be in the late-night sector, which is sure to be consolidated.

"We will also see private equity investors taking stakes in public companies to take advantage of consolidation and rising values."