Slaughters provides Punch in Allied fight

Slaughter and May is entering a fight on behalf of Punch Taverns to outbid Whitbread on its proposed takeover of Allied Domecq Retailing UK.

Clifford Chance is acting for Whitbread on its proposed purchase of Allied Domecq's retail arm, a deal it thought it had clinched on 25 May with a share offer worth u2.4bn (The Lawyer, 31 May).

Punch is attempting to snatch Allied Domecq Retailing by offering it a cash deal, thought to be in the region of u2.7bn, which it claims is not subject to capital gains tax.

Punch's bid is supported by Bass which, if the offer is accepted, will purchase u1bn-worth of the newly bought pubs.

Patrick Mears, tax partner at Allen & Overy, is advising Bass on this issue.

However, Whitbread says it does not think a cash offer could avoid tax. A Whitbread spokesman says: “A cash offer would leave Allied with a capital gains tax bill, even though Punch says it would not.”

Neil Hyman, a company partner leading the Slaughters team, refuses to comment on how the Punch bid will bypass capital gains tax.

But one leading tax lawyer says: “If Punch paid straight cash, Allied would have to pay tax.”

He says: “I have heard Punch is planning to offer a loan note alternative if Allied is not happy with cash. It would postpone tax, but it must be paid at some point in the future regardless of how Allied's retail arm is purchased.

“Even if Whitbread shares are used, when they are sold tax must be paid.”