Patron Capital, the pan-European institutional investor focused on property backed investments, has completed its acquisition of Punch Taverns. The deal, at 180 pence in cash per share, values the equity of Punch at approximately €436.8m (£402m) and implies an enterprise value of around €1.95bn (£1.8bn).
Punch is a leading owner of tenanted pubs in the UK. In the 12 months to March 2017, the Punch estate reported underlying EBITDA of around €186.8m (£172m) and comprised approximately 3,200 pubs located across the UK, 96% of which are held on a freehold or long leasehold basis. Punch operates its pubs predominantly under the tied leased and tenanted model, with a growing number of pubs operated under either a retail operating model or as free-of-tie commercial leases.
Punch is financed through two whole business securitisations, the Punch A Securitisation (approximately €836.3m (£770m) of gross debt secured against around 1,900 pubs) and the Punch B Securitisation (approximately €597.2m (£550m) of gross debt secured against around 1,300 pubs), as well as certain cash resources held across the Punch Group. Punch also owns approximately 50 pubs outside of the securitisations.
The Punch A Securitisation has been sold to Heineken UK in a back-to-back transaction, which is set to complete next week, for approximately €331.2m (£305m) equity value. Patron will own the remaining pubs as well as the Punch Holding Group. Punch will continue to operate the Punch A pubs for Heineken for six months under a transitional services agreement.
Patron’s partner on this investment is May Capital, the London-based private equity investor and advisor with experience in the pub industry.
With a renewed level of operational and investment focus made possible by a sale of the Punch A Group to Heineken, Patron and May Capital expect to continue to pursue, and in some cases accelerate or enhance, key elements of the Punch management team's strategy, including investing in the pubs, adapting and modernising operating models such as through the roll-out of the managed operating format, and continuing to sell non-core assets. Patron’s equity for the purchase came from its fifth fund, which closed last summer having raised €949m.
Keith Breslauer, Managing Director of Patron Capital, commented:"Completing this complex deal paves the way for an exciting future for Punch as a more focused business. This is a company that has undergone a number of challenges and distractions in recent years but has a portfolio of high quality pubs with excellent future potential.
