Punch Taverns: Wikis


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Punch Taverns plc
Type Public (LSE: PUB)
Founded 1997
Headquarters Burton upon Trent, England, UK
Key people Peter Cawdron, Chairman
Giles Thorley, CEO
Industry Pubs
Revenue £1,560.6 million (2008)
Operating income £560.9 million (2008)
Net income £(64.7) million (2008)
Website www.punchtaverns.com

Punch Taverns plc (LSE: PUB) is the largest pub and bar operator in the United Kingdom, with around 8,400 leased, tenanted and managed pubs. It is headquartered in the traditional brewing centre of Burton upon Trent in Staffordshire. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.



The company was founded by Hugh Osmond and Roger Myers in 1997 when they bought the Bass portfolio of public houses.[1]

Mr Osmond then snatched Allied Domecq's pubs from Whitbread in 1999 after a ferocious bid battle with the then brewer.[2] After the deal, Punch spun off its managed pubs into a separate division, Punch Retail, which was later renamed Spirit Group.[3]

In 2002 Punch demerged the Spirit Group[4] and then floated itself on the London Stock Exchange.[5] Punch bought Pubmaster in November 2003: the acquisition of larger rival Pubmaster, catapulted the operator to number one in the league.[6] The acquisition took the group to more than 7,000 pubs and cemented Punch's position as a major pub operator. After completing this deal Punch later bought InnSpired Inns plc,[7] and then Avebury.[8]

Meanwhile, Spirit Group (at that time independent from Punch Taverns) expanded when it acquired Scottish & Newcastle's 1,450-strong pub estate in 2003, beating off rival Mitchells & Butlers.[9]

In September 2005, Spirit Group sold its "City Nights" portfolio of in excess of 180 pubs and clubs, en-bloc, to Alchemy - the financial backers behind the newly-formed TCG Acquisitions Ltd (Tattershall Castle Group).

In December 2005, Punch agreed to re-acquire the Spirit Group for £2.68bn which since 2002 been owned by the private equity firms Blackstone, Texas Pacific and CVC Capital Partners.[10]

In 2006 the Company sold its Old Orleans pub chain, which it had acquired when it bought Spirit Group, to Regent Inns.[11] Punch also sold 290 Spirit sites to the private equity firm GI Partners.[12]

In March 2008 Punch withdrew from a bid to merge with Mitchells & Butlers.[13]



Leased pubs

The Group has about 7,600 leased and tenanted pubs forming the bulk of the portfolio.[14]

Punch Pub Company

Punch Pub Company is the managed arm of Punch Taverns operating several pub chains. The group owns over 900 outlets nationwide.[14]

Pub chains owned by the Punch Pub Company include Two for One, Chef & Brewer, John Barras and the Eerie Pub Company which has a gothic horror theme.

Premier Lodge

Spirit Group formerly owned the Premier Lodge chain of budget hotels. These were acquired by Whitbread in 2004 and rebranded as Premier Travel Inn hotels (now renamed as 'Premier Inn') However many Spirit Group run pubs remain integral parts of Premier Inn properties.

Reflections on business practice

On May 13, 2009, the House of Commons published a report[15] regarding its monopolies inquiry into pub groups. The report "raises a series of questions about the pub company (pubco) tied pub business model and calls on the Government to act urgently, in particular, to refer the matter to the Competition Commission. It challenges the pubcos which operate a tie to prove its benefits by giving lessees the choice between a tied or free of tie lease."[16] The report also raises issues regarding the actual conduct of pubcos in dealing with struggling tenants.

Committee chairman Peter Luff, MP says: "The report explicitly acknowledges that 'not all the problems of the pub industry come from the tied pub model. It is clear there are many pressures on any retail business ... Nonetheless, our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies.'"[17]

According to an article in Private Eye, the select committee asked 1,000 publicans for their opinions regarding their experiences working with Britain's largest pubcos, which includes Punch Taverns. The Eye states that the committee's findings had "at last shed light on an industry in freefall, with 40 pubs closing [in the UK] every week. Pubcos are essentially greedy property companies with a cuddly name – and they own nearly half the country’s pub freeholds." [18]

The Committee commissioned its own independent survey as part of the inquiry, to determine whether the negative evidence received from lessees was typical of feelings in the industry.[19]

"The survey results, printed with the Committee’s evidence, underpinned the Committee’s findings. 64 per cent of lessees did not think their pubco added any value and while a fifth had had a dispute with their pubco, few (18 per cent) were satisfied with the outcome. The Committee was astonished to learn that 67 per cent of the lessees surveyed earned less than £15,000 pa and over 50 per cent of the lessees who had turnover of more than £500,000 pa earned less than £15,000 – a 3 per cent rate of return. The lessees may share the risks with their pubco but they do not appear to share the benefits. The report therefore concludes that problems which were identified by the Trade and Industry Committee four years ago remain. An imbalance of bargaining power between lessees and pubcos persists and the arrangements for assessing rents remain opaque. Rental assessment should be the basis for negotiation, but incumbent lessees often risk the loss of their home as well as their business if they cannot reach agreement, the report says."[20]

The Eye says the committee found that pubco tenants are initially attracted to run pubs by low entry costs, but soon find that making a decent living is very difficult. Tenants' leases oblige them to buy alcoholic drinks from nominated suppliers at up to twice the open-market price. If a struggling tenant leaves, another tenant can be found to replace them. In the years of booming property prices this practice was successful, but is much less so now, as evidenced by the number of pub closures. The Guardian reported that MPs found an imbalance of power that can amount to "downright bullying" between the big pubcos, such as Enterprise Inns and Punch Taverns, and their tenants. The MPs are said to also want a ban on pubcos selling pub premises with covenants that prevent them being used as pubs in the future.[21]

The select committee was apparently not impressed by the pubcos' senior executives, rebuking them for having given "partial" evidence to the committee, "and, in Thorley’s case, having on one occasion given evidence that was "false"."[22]

The committee recommended that "the tying of beers, other drinks and ancillary products should be severely limited to ensure that competition in the retail market is restored." The Eye notes that select committee chairman Peter Luff "may be looking to right the wrong created by the Thatcher government’s disastrous "Beer Orders" of 1989, in which he was involved."[23]

Shortly following the committee's report CAMRA issued a 'Super-Complaint' forcing the Office of Fair Trading to investigate this within 90 days. The OFT published it's report on the 22nd of October 2009. The report largely cleared the industry of behaving in any way that caused damage to consumers [24]


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