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Last Updated: Friday, 28 April 2006, 11:12 GMT 12:12 UK
M&B confirms Beefeater interest
All Bar One pub
M&B has enjoyed an increase in quarterly sales
Pub and restaurant chain Mitchells & Butlers has confirmed reports it is considering buying 250 Beefeater and Brewers Fayre outlets from Whitbread.

Mitchells & Butlers (M&B) made the announcement as it unveiled a 4.3% rise in quarterly sales, and said it could return up to 500m to investors.

Whitbread said on Tuesday that it was selling the under-performing sites.

M&B owns the Harvester and All Bar One chains. Earlier this month it rejected a private equity takeover approach.

The 2.7bn offer on 13 April came from the R20 group, led by tycoon Robert Tchenguiz.

Debt increase?

M&B chief executive Tim Clark said on Friday morning that the planned 500m return of capital to investors could be scaled back if it buys the Whitbread assets, which are valued at 450m.

Investment bank Morgan Stanley said that M&B might choose to buy the Beefeater and Brewers Fayre outlets by raising its debts, thereby still allowing it to return between 250m to 300m to shareholders.

M&B's like-for-like second quarter sales rose 4.3% in the 13 weeks to 22 April, an increase on the 4% rise seen in the first quarter, it said in a trading update.

The company operates more than 2,000 sites and was created when former Bass company Six Continents demerged its hotels and retail divisions in 2002.

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