"Last week it emerged that Berkshire Hathaway, the US investment group run by Warren Buffett, had built up a 2.2 per cent stake in Allied."
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Financial Times ; 24-May-1999 01:51:32 am ; 426 words
Allied Domecq and Whitbread were last night close to reaching an agreement about the £2.3bn sale of Allied's UK pub and off-licence interests.
After a day of intense negotiations, advisers to both companies were confident of resolving several tax and debt-related issues, understood to be worth between £60m and £80m, which had threatened to undermine the agreement. "We are trying very hard to get to the bottom of the issue," one adviser had said earlier.
The discussions are expected to continue today. Allied and Whitbread may put out a statement today confirming that the deal is back on track. The final details could be announced on Tuesday or Wednesday. Allied and Whitbread refused to comment last night.
Talks between the two companies, which started in February, reached a deadlock at an acrimonious meeting on Saturday when Allied rejected Whitbread's final offer. The two sides are thought to have fallen out over the treatment of a tax item and the amount of Allied's debt that would be transferred with the business.
Failure to agree a deal would have been embarrassing for Allied, which has come under fire for negotiating exclusively with Whitbread.
Bass, the brewing group, Punch Taverns, the privately held tenanted pub operator, and Nomura, the Japanese financial group, have all expressed an interest in bidding for the assets.
Last week it emerged that Berkshire Hathaway, the US investment group run by Warren Buffett, had built up a 2.2 per cent stake in Allied. The group has decided to sell its pubs to concentrate on spirits and retailing.
Allied and Whitbread have been negotiating about the sale since February. Allied is selling 3,600 pubs as well as its stakes in Britvic, the drinks group, and First Quench, the off-licence chain which was created last year by the merger of Victoria Wine and Threshers.
If Allied and Whitbread do agree a deal, other interested bidders will be given access to the information memorandum and will be able to decide whether to enter the fray.
However, Whitbread is likely to set a time limit on its offer, limiting the opportunity for other bidders to conduct due diligence.
Whitbread has offered shares worth approximately £2.3bn for the businesses, as well as taking over some of Allied's debts. Whitbread's advisers believe the deal, which is structured to limit the capital gains tax bill triggered by the sale, make it superior to any cash bid.
Hugh Osmond, chairman of Punch Taverns, said: "Our view is that the tax issues are not insurmountable." Lex, Page 18
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