Exclusive: Slow progress on Stonegate/Town & City merger

Talks over merging Stonegate Pub Company with Town & City Pub Company are making very slow progress, sources indicate.

Stonegate, backed by private equity firm TDR Capital, completed the acquisition of 333 Mitchells & Butlers wet-led pubs over the weekend.

Stonegate's chairman Ian Payne is also chairman of Yates's operator Town & City and a merger of the two wet-led operators has been mooted.

Morning Advertiser sources suggest that the Icelandic bank Kaupthing, which owns Town & City Pub Company alongside Commerzbank, is proving a little unreceptive to the merger idea.

A source said: "It's still an opportunity waiting to be done but in all honesty it's very hard to call (whether a deal can be done) — it's certainly very far from being complete (at the moment)."

Ian Payne is filling the de facto role of executive chairman at Stonegate while talks about a possible merger with Town & City Pub Company are "on-going".

There is an agreement in place for M&B to provide transitional management for nine months.

Pub managers at the 333 pubs attended one of three roadshow meetings with Stonegate management last month to discuss plans for the future.

A source said: "The meetings went very well — the managers are all very keen. There's a feeling that they've been slightly "out of it" at M&B because their pubs are wet-led." Kaupthing is still the largest shareholder in Town & City with Commerzbank — the main debt provider to the business — holding about 30% of the equity. Stonegate was acquired by TDR Capital out of it own funds with bank finance to be sought later.