Shareholders to lose out at Slug & Lettuce

THOUSANDS of private shareholders in SFI Group, the troubled operator of the Slug & Lettuce chain of bars, will receive nothing from the sale of the business.

The group, once valued at £225 million, will be carved up and sold in a process that will just about cover its £80 million debts.

Most of the group will go to property magnate Robert Tchenguiz while the rest will be placed in administration.

The pub operator was withdrawn from the stock market two years ago amid fears that it was heading for insolvency. Accountants later uncovered a £20 million hole in its books.

The syndicate of banks that now controls the group, led by Barclays, is in exclusive talks with Tchenguiz's R20 private equity arm. The deal would see R20 buy just over two-thirds of SFI's 150 pubs and bars for between £75 million and £85 million.

It is thought that the remaining loss-making sites would be put into a separate operating company and placed in administration.

When the banks took the business private, debts were cut from £160 million to £80 million in exchange for a 75 per cent stake. The remaining shares were divided between a management team, led by rescue specialist Stuart Lawson, and other shareholders.

In January, the banks appointed corporate recovery specialist Kroll and Ian Edward, a former non-executive at Duke Street Capital, to find a buyer for the entire business. However, bidders were unwilling to consider a number of 'poison pill' leasehold sites with prohibitive rents.

R20 will put the SFI estate, which includes the Litten Tree pub brand and is entirely leasehold, with Laurel Pub Company, bought by Tchenguiz from industry veteran Ian Payne last November.

Tchenguiz, the flamboyant Iranian who recently completed the £200 million acquisition of pubs and bars group Yates, is also believed to be in talks to buy a £250 million package of pubs from Spirit Group.

If successful, that would take the spending spree on pubs by his R20 group to nearly £1 billion in only six months.

He is planning to build a largescale company out of his growing collection of bars that also include brands such as Casa, Hog's Head and Ha! Ha! Bar & Canteen.