Time appears to have run out for Laurel Pub Company.
If MidOcean, the private equity business that oversees the business on behalf of Deutsche Bank, is yet to nail the official “for sale” boards to the business, it is but a formality.
Having lost out to Spirit Group in last year’s race to buy the pub industry’s crown jewels, the £2.51bn Scottish & Newcastle Retail business, Laurel has seen further opportunities slip through its fingers.
It came second to Wolverhampton & Dudley in the £90m Wizard auction, and a request to see the Yates’ books ahead of the GI-backed buyout, suggested that the company, led by Ian Payne, was running out of ideas.
Now the company seems to have few places to go.
Predictions from within, that it would ‘do more deals than anyone else in the sector’ have failed to materialise. It has been anything but a buyer of businesses.
Consequently, the would-be predator has become the prey.
When MidOcean commenced the auction of Laurel’s community pub business in the spring, indications suggest it did everything in its power to sell entire business, including the 177 high street sites, to the four bidders of Greene King, Punch, Spirit and Wolves, as one package.
Sources suggest that the high street business had a £150m price tag, subject to the reversal of the sale-and-leaseback deals in place with London & Regional Properties. The attempt was unsuccessful but MidOcean is clearly willing to call it a day. Its three-year timetable on the Laurel investment was up in March and our calculations suggest that MidOcean has almost doubled its original £140m investment in the business - not a bad return.
Laurel has also axed 100 office staff including finance director Nick Backhouse, an M&A specialist, following the sale of 432 community pubs to Greene King.
Everything would seem to point to a sale.
When Laurel was formed out of the Whitbread pub business, it put most of its investment capital into the key growth driver of the business - its community pub estate.
Accordingly, it spent little on the high street. It did invest some in Hog’s Head, but not enough, and too late.
Consequently the business it is left with, is subscale and under-invested.
Because of the Yates deal, venture capitalists will be dusting off the spreadsheets on high street businesses.
And despite Mark Jones’ best protestations that his group is not about to buy the business, Laurel is the obvious play. GI Partners did not buy the Yates business simply to stand still.
The real opportunity for GI - and Jones - lies in bringing other high street businesses into the fold with Yates, then stripping out management costs and other central overheads.
Jones will almost certainly face competition from Ian Payne. But without a clear strategy and without anything obvious to buy, are the likes of RBS and Barclays going to back another subscale business?
It is in a difficult place. As one insider at Laurel said last week: “At our size of 177 high street sites, you either buy or you sell.” Odds are it will be the latter.
