Punch Taverns has announced plans for a late-summer demerger of its relatively healthy managed-pub division, Spirit, from its sickly tenanted operations. However, some are disappointed that a more radical default was not pursued, and we still see few reasons to own the shares.
The tenanted estate will be split into a core of about 3,000 pubs, and a second tier of over 2,000 earmarked for sale at the rate of around 500 a year.
Shareholders' main disappointment regards the division of the assets which the group's three bond issues (Punch A, Punch B, and the Spirit debenture) have no claim over. Some hoped management would opt to default on Punch debt and give everything to the more-viable Spirit business. But management is actually proposing each company get about £120m in cash and that the Matthew Clark business, which has no debt has secured against it, be retained by Punch.
