The City: Bankers abuzz with bonus banter

Published: 18 January, 2007

The talk in the Square Mile is of bumper bonuses for bankers, based on the boom in mergers-and-acquisitions business. There have been several notable deals already this year, not least the takeover of Allied Domecq by Pernod Ricard, but companies are enjoying strong cash flows, interest rates are comparatively low and unlikely to go higher in this cycle, and target companies remain relatively cheap - classic corporate-expansion backdrop.

And bankers are only too keen to identify the targets. Take Spirit Group, the former Punch Taverns-owned chain of 2,000 or so houses based largely in the south of England. The board let it be known informally that they were considering a flotation so that the company's private-equity backers could get some of their money out of the venture. Ball-park figures of 2.5bn to 3bn were mentioned for the company's valuation.

That whetted appetites. Punch itself was linked with a buyback as early as June, with the main interest being some 1,500 houses that it could convert to tenancies. Mitchells & Butlers, the former Bass-managed house operation that trades under names such as All Bar One, has expressed keen interest in the 500+ high-street bars, notably the Chef & Brewer outlets. It has even been suggested that Punch and M&B might work together on a break-up of Spirit.

Not to be left out of the party, Robert Tchenguiz, the property tycoon with a keen interest in acquiring licensed premises,

has made an approach to the company, while Robin Saunders, a former star investment banker who has set up her own private-equity vehicle, has approached Spirit with a view to making an offer. And those are only the declared runners and riders.

Meanwhile, the City cannot scotch the perennial rumour that Britain's biggest brewer, Scottish & Newcastle, is high

on the wish list of SABMiller. SAB splashed out 4.5bn back in July for Colombia's biggest producer, and observers thought it would have to absorb that purchase before making its next expansionary move. But the gossip is that SABMiller is putting together a 4.9bn offer for before Christmas. For all its expansion recently, SAB remains comparatively weak in Europe, a problem that would be solved by S&N, as well as bringing with it the British group's rapidly expanding interests in Russia, China and India.

One thing is certain: no talks are taking place yet, because S&N CEO Tony Froggatt has been buying shares, something he is not allowed to do if major changes are being discussed.

But it does not stop bankers dreaming of the bonuses they would earn if SAB made a successful approach.

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