MBO rumours rife at Wetherspoon's

The future of pub operator JD Wetherspoon remains unclear as rumours of a management buyout (MBO) or takeover gather pace.

The company has been linked to an MBO since share buybacks followed founder Tim Martin's return to the company as a part-time nonexecutive in April, after a six-

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	Wetherspoon's: renewed speculation

month sabbatical. Wetherspoon's share price rose on the back of renewed bid speculation last week, but the gains have already been lost. Arbuthnot is the latest broker to change its rating on the company to a "sell" as speculation mounted. With its shares back to the 240p mark, the company would be valued at about £450m. John Lake, director of corporate finance at Deloitte, said an MBO was the most likely outcome because of the relative unpopularity of leasehold pub businesses in the market and Martin owning over 20% of the stock. In response to falling sales, Wetherspoon's has swapped its growth strategy for a "holding pattern", concentrating on its existing portfolio. "But to get private equity interest you need a ‘where-do-we-go-next story'," said Lake. Broker Panmure Gordon pointed out that companies subject to bid speculation usually have some prospect of earnings stability, but there were no signs that this was the case. Panmure said the pubco had "depressing long-term prospects" because of its minimal margins, rising costs and fragile profit mix. It expects the smoking ban in Scotland and gaming deregulation to hit revenue further. The broker concluded that "Wetherspoon's must increase its prices" to compensate, but this would be hard, because of its overreliance on price differential. Jim Clarke, Wetherspoon's financial director, dismissed the latest rumours. "We've no plans to go private, and there are no bids that I know of. It's just the usual speculation," he added. *Source: Caterer & Hotelkeeper magazine, 18 November 2004*