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MGPE clinches Whitbread pubs at last

Is the successful £1.625bn bid for the estate the turnaround for Morgan Grenfell?

Home and dry at last. Morgan Grenfell Private Equity (MGPE), the firm that came out of 2000 badly bruised and beaten, has wrapped up a deal with Whitbread Plc, the UK restaurants, hotels and leisure group to buy 3,000 pubs for £1.625bn. In a fiercely competitive auction, victorious MGPE prevailed over rival bidders Punch, Nomura Principal Finance Group and Candover.

An agreement was reached on Monday night despite a late intervention from Hugh Osborne, Punch’s chairman, who alleged that MGPE’s bid violated a non-compete clause dating back to DB Capital’s interest in Punch as a shareholder in 1999. Whitbread’s chief executive, David Thomas, said MGPE, having received legal advice, was not concerned by Osborne’s objection to the deal.

For the private equity house, the transaction is of great significance. After a very difficult last year, during which an investment in Germany’s EM.TV turned sour, the planned flotation of portfolio company Coral fell through, plans to sever tie from parent Deutsche Bank got nowhere and several leading staff left the firm after a dispute over investment strategy, observers had expressed doubt over MGPE’s prospects to continue as a viable buy-out business. The purchase of the Whitbread pub portfolio marks the firm’s strongest signal yet that it very much intends to remain a competitor in the market place.

Sources close to the firm that staff were extremely pleased with the outcome. “The pubs and bars division has an excellent portfolio of assets and we are confident that, together with management, we can significantly develop the business and create additional value in the future”, said Graham Hutton, MGPE’s chief executive.