Merger to create pub giant

The two sides have been in exclusive negotiations since last month The deal, which includes taking on Pubmaster*#*8217;s debt, will make Punch the biggest operator in the market, with 7,400 pubs. However, it is likely to only hold the number one spot briefly, since rival Enterprise Inns has an option to buy out Unique Pub company early next year, which will create a 9,000 strong pub estate

The companies operate in the leased and tenanted sector, receiving rents from licensees and controlling supply of beer and other key products. The expansion of Punch and Enterprise reflects a drive to command favourable supply terms from the major brewers.

Punch, which has reported a 22 per cent rise in annual profits, expects to generate £10m a year in cost savings from the deal, which is expected to complete at the end of this month.

Punch chief executive Giles Thorley said: "This is a transformational deal for Punch and represents a quantum leap in terms of Punch's growth. The Pubmaster estate provides an excellent strategic and geographic fit with our existing portfolio and nearly doubles the size of our estate."

Pubmaster was founded by pub entrepreneur John Sands. Its main shareholders are the WestLB principal finance division, and property tycoon Robert Tchenguiz.

The move follows the takeover last month of the Scottish & Newscastle Retail by Spirit Group. Spirit was demerged from Punch last year to focus on the company-owned-and-managed sector of the UK pub market.