DEAL OF THE WEEK – PUNCH PUB COMPANY

Slaughters sees Punch through a loss of Spirit

Slaughter and May is fielding a new partner to advise on the demerger and refinancing underway at Punch Pub Company as the UK's largest pub operator prepares for a stockmarket flotation.
Neil Hyman led the Slaughters team on the Allied transaction, said to have cost Punch £100m on various fees. He also advised Punch on its subsequent securitisations. But Hyman relinquished his role of client partner when he moved out to Slaughters' Hong Kong office last summer. Corporate and financing lawyer David Johnson, who gained partnership in 2000, has taken on the client partner role, leading a cast of thousands on the demerger.
“I stepped into Neil's shoes, and they're very large and distinguished shoes, but a lot of the other personnel are still the same,” said Johnson. “They're a very interesting client to work for. If you look at the way they've grown through acquisitions, they've had a constant need for external advice.”
Punch is reported to be close to finalising a split of its debt with managed pub company Spirit Group, which would see Punch take £1.5bn of group debt and Spirit £650m.
The demerger of Spirit in the run-up to an initial public offering (IPO) of the tenanted business, expected to value the group's equity at around £600m, comes just three years after Slaughters advised Punch on its successful £2.7bn bid for the Allied Domecq pub and retail business.
Marc Hutchinson, who advised on the Allied acquisition, is once again leading on the financing side. Corporate finance partner Kathryn Davis is also involved, particularly with matters relating to shareholders and the banks.
As a procedural step, the capital reduction as part of the demerger has to be ratified by the High Court and Slaughters has instructed Martin Moore of Erskine Chambers to represent Punch.
“That's only a small part of the jigsaw that's happening with Punch at the moment,” said Johnson.
Slaughters has relationships with both the managed and tenanted sides of the Punch business and will be hoping to retain its role of principal corporate adviser with both after the demerger of Spirit.
Punch's main institutional investor is Texas Pacific Group. Ashurst Morris Crisp partner Bruce Hanton, assisted by Cosmas Wong, is advising Texas on the reorganisation and IPO, to the extent that the investor's interests differ from those of the company.
“They'll continue to have a substantial stake in the managed business and we would expect to continue to advise them on that side of the business,” said Hanton.
Ashursts has advised Texas throughout its investment in Punch, which dates back to 1999, and which is currently its main UK investment.
Punch has been at the vanguard of the new pub chains, set up after the beer orders legislation of the early 1990s forced national brewers to reduce their pub ownership.
Industry eyes are watching Punch closely as it prepares for the first float of a securitised pub business. A successful IPO could prompt other securitised estates to follow suit.