Punch Taverns, the UK’s biggest pubs group, announced plans today to split its business in two and sell over 2,000 of its pubs.
The announcement is the result of a strategic review by Chief Executive, Ian Dyson, following his take-over of the company in 2010.
Punch has been hit by the recession, the smoking ban and the rise in cheap supermarket booze. This has resulted in a fall in company profits and sky high debt, hitting a massive £3.3bn last year.
The company plans to separate the managed and leased pub operations to create two new public companies.
The leased side, where landlords rent the property and get their supplies from Punch is facing more difficult conditions and will face the bulk of the cuts.
Currently they have 6,000 leased, or tenanted, pubs, over half of which will be sold at a rate of about 500 per year.
And some will be transferred to the managed division, Spirit, which includes brands such as Chef & Brewer, Fayre & Square and Flaming Grill.
Although the managed side is suffering lower sales and profit margins than its competitors Punch believe they are well placed to take advantage of the growing trend in eating out.
Ian Dyson said: “We believe that there is a significant value creation opportunity at Punch, with immediate upside in managed and longer term upside in leased.
“We do not believe that either opportunity can be maximised within the current Group structure and accordingly, we propose that the two businesses be separated.
“This will be achieved by the demerger of Spirit and the creation of two independent public companies.
“Spirit will be positioned to deliver market leading sales and profit growth and to expand with the aim of becoming the UK’s leading managed pub operator.”
But bondholders expressed concerns that the restructuring did not tackle the issue of turning around poor trading results.
A spokesman for a special committee of the company’s creditors said: “We remain concerned to see the real issues in the operating businesses addressed fast.
“We have waited six months for the review to be conducted, during which time operational performance in the leased estate, where bondholders have £2.5bn at risk, has continued to decline.”
Shares in Punch Taverns rose 4% following the announcement and ended the day 2.3% higher.