Inside Track by Peter Martin
The City, they say, works on sentiment. So it seems with the restaurant and pub sectors.
The £2.51bn paid for the Scottish & Newcastle retail estate before Christmas put down an important marker. TDR's swoop for the Ask Central restaurant business and Wagamama's plans for an IPO confirmed the sense among would-be investors that the eating and drinking-out markets might well be the place to be doing business again.
While food-led companies have been making the running so far, pubs moved into the spotlight this week, with the prospect of auctions for Wizard Inns and the Laurel Pub Co.
Little has fundamentally changed in the market place. Food-driven businesses may be doing relatively better, but the cut-price end of the High Street bar market remains just as tough.
But, sectors that not so long ago were near the top of the City's "avoid" list, appear to be coming back into vogue. City investors don't like to be seen to be missing out on an opportunity. Confidence is returning.
So what of Wizard and Laurel?
It has been understood for some time that Wizard, Nomura's last remaining pub investment, was likely to look for an exit within a year or two. The question was when?
A number of approaches from unnamed suitors have now prompted Guy Hands to put up the official "for sale" signs and invite an auction, in the anticipation that this is the moment to gain a good return.
A trade sale is the most likely option, but a private equity player backing a new management team should not be ruled out. Greene King and Wolverhampton & Dudley are among those already mentioned as interested parties, although Barracuda, Mark McQuater's private equity backed managed house chain, would also be a logical buyer.
The problem for Barracuda would be that it would likely have to refinance to meet the £70m-plus price tag for Wizard's 64-strong estate. Doing both would be a real test of investor confidence in the market.
Laurel is a little different. News of its backers' plans to appoint advisers to look at a sale looks more like an internal leak than a planned announcement. Ever since it failed to land the S&N deal, speculation, especially among Laurel's own team, has been rife that it would be put on the market. The acrimonious ending of the joint venture with Vodka Bar Management and the departure of director Karen Forrester have simply added to Laurel's discomfort.
M&B and Spirit are unlikely to be interested; both have different strategies and problems. Greene King and Wolves might, but may want strong niche players instead. The High Street element would surely deter them.
So that probably leaves another private equity player to step in with a new management team ready to take over, armed with either an aggressive acquisition or a disposal strategy. The price is likely to be in the £500m range.
The Times reported that one option is to split the 430 or so community pubs from the 180 High Street sites in a bid to gain maximum value.
Both owners, however, will be banking on the current apparent change in attitudes among investors to boost prices.
