Cash the key to Urbium battle

Cash is king. It is safe to assume that if Regent Inns had bought cash to the table in its efforts to buy Urbium, it would be now perusing the books. Instead three cash-and-paper initial offers, the best at 975p a share, valuing the business at over £100m, have failed to engage the Urbium board. Given that this is more a proposed transfer of value, the key with paper for Urbium is to consider if it, under different circumstances, would want to form a similar bid for Regent. The answer is probably a negative. My sense is that it seems unlikely Regent will win this one unless they can find cash. Offering paper is convenient for Regent but if Urbium’s institutional shareholders liked the company that much they would own shares in it – they don’t, there is no real overlap between the share registers. But the phoney war – a bid has yet to be tabled – to this point, has been fascinating to watch. Having initially proposed an offer at an opportunistic 820p, Regent returned at 930p and then at 975p, with a 45-55% cash / paper mix, representing a substantial premium. All were rejected, with sources close to Urbium indicating that the offers “were too low and did not comprise the right amount of cash”. For Regent to go in so low with its initial approach appeared to do little to endear the company to Urbium’s experienced boardroom, while Urbium’s observations, in the earlier exchanges, that it could not appreciate the synergies that may exist between the two businesses, lacked credibility. Common sense has started to prevail now that Numis, Urbium’s broker and advisor, has asked the Takeover Panel to remove “put-up-or shut-up” deadline of 21 July imposed on Regent. It would be unfortunate if Regent was prevented from participating in what now looks like a certain auction due to a technicality, especially given the Urbium board took nine days to reject its second offer. The operator of Walkabout and Jongleurs now has a further six weeks but it remains to be seen whether or not Regent will hang around for that long. With a clutch of hungry, cash-rich VCs having now indicated an interest, the right amount of cash is 100%. The company will probably not be able to compete with that and will not want to hang around just to keep a floor on the share-price. One important element to this whole situation, which seems to have been largely overlooked, is that John Conlan, Urbium’s non-executive chairman, also chairs Barracuda, the privately owned pub group that was recently the subject of a private equity auction. Charterhouse emerged as the winner of that particular contest, paying a chunky £260m, but also in the shake-out were Apax, Bridgepoint and Electra. Needless to say R20, Robert Tchenguiz’s private equity arm was also there, albeit at the preliminary stages. Conlan would seem well placed to flush out any private equity interest and if need be, conduct a proper sale process. Sources close to M&C suggest that certainly Charterhouse and Electra are keen, and although the business is leasehold it is hard to imagine R20, having paid £80m for SFI, not taking an active interest in what is a prime West End and City bar business. Not landing Urbium will be a blow to Regent. If it does, as seems likely, miss out it will pursue other opportunities, such as Inventive Leisure, the operator of Revolution vodka bars, and perhaps Ultimate Leisure, which also appears to be in play. Despite all the fun and games a formal offer for Urbium has yet to materialise. But it can only be a matter of time.