Harvester owner Mitchells & Butlers has expressed an interest in purchasing a large percentage of ailing pub company Orchid’s outlets. The cost rumoured is to be around £266 million. Should Orchid agree to the deal, Mitchells & Butlers will take over the running of 180 of the brand’s food led properties, leaving the 40 remaining traditional pubs in Orchid’s portfolio to enter administration.
Mitchells & Butler is not the first firm to be linked to an Orchid acquisition, as private equity firms Colony Capital and Starwood both confirmed they had entered bids earlier this month. However, Mitchells & Butlers is at present thought to be the front runner in the takeover stakes as its £266 million bid is between £10 million and £15 million higher than the bids entered by both private equity firms.
Spirit Pub Company is also thought to be considering entering a bid for Orchid’s entire portfolio, although details of this bid are yet to be revealed by any of the parties involved. Brewery company Greene King confirmed that it had held early discussions with Orchid management, but pulled out of negotiations last Friday after failing to reach an agreement.
Both Mitchells & Butler and Orchid have so far declined to comment on the progress of talks, with Mitchells & Butler chief executive Alistair Darby describing the story as “market speculation”.
Orchid’s problems first began in 2008, when it was forced to implement a pre-pack administration deal due to unsustainable debt. This was followed by a restructuring programme in 2012, which saw a trust linked to Deutsche Bank take ownership of the chain.
Mitchells & Butlers’ interest in acquiring Orchid’s food led pubs may come as a surprise for many, as the group is by no means thriving in the current market. According to analysts at Langdon Capital, its first half performance saw like for like sales rise by only 1.1 per cent – significantly underperforming when compared to its closest competitors.
However, Mitchells & Butler could feasibly stand to do well out of this deal, as Orchid’s St Albans headquarters could be sold for around £8 million if acquired by the rival chain. While this may not make much of a dent in the £266 million cost, it could allow for further investment into the Harvester and All Bar One brands, hopefully bringing some much needed stability to Mitchell & Butlers’ portfolio and allowing a struggling group to finally recover from four long years of recession.
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