Punch in £3.7bn move for M&B

Punch Taverns, the biggest pub company in Britain, today revealed plans to create a giant £3.7 billion business by merging with West Midlands-based Mitchells & Butlers.

The tie-up, which would involve more than 10,500 sites, comes just days after M&B, owner of chains including All Bar One and Harvester, racked up £274 million in losses.

M&B lost out following the collapse of a £5 billion property deal last summer.

The firm's finance director, Karim Naffah, resigned, and the group later confirmed potential takeover interest in a turbulent week for the business.

The takeover deal with Staffordshire-based Punch could bring scores of job losses to the West Midlands.

M&B employs around 1,000 people at its Fleet Street headquarters and around 43,000 full and part-time workers at its 2,000 pubs and restaurants. Punch has 675 at its Burton on Trent head offices and around 22,000 staff at its 9,000 pubs.

Under the merger proposals both Punch and M&B shareholders would each own 50 per cent of the new company, with M&B shareholders also receiving a cash payment of £175 million.

Punch, which has a stable of 8,450 outlets, said the cost-saving logic behind the deal was "compelling".

The boss of the new business would be current Punch chairman Giles Thor-ley, with M&B's chief executive Tim Clarke becoming chairman.

This would force out cur-rent M&B chairman Roger Carr, whom shareholders called on to resign last week in the wake of the firm's disastrous property venture.

The group lost the £274 million after betting on interest and inflation rates as part of the deal with entrepreneur and 23 per cent shareholder Robert Tchenguiz. Banks withdrew funding from the property deal following the credit crunch, and interest rates have since dropped, adding to the losses.