Allied agrees to pounds 20m failure fee

ALLIED DOMECQ, in talks to sell its pubs estate to Whitbread, is understood to have agreed to pay a pounds 20m penalty fee should the pounds 2.3bn deal fail.

The scale of the break clause is likely to anger Hugh Osmond, the Punch Taverns chief who has been critical of Allied's refusal to entertain other offers for the 3,600 pubs. Last month Allied rebuffed an approach from Punch, a private pub company with 1,800 outlets, a week before saying it had granted Whitbread exclusive negotiating rights. A spokesman for Allied said: "It is becoming more usual that deals like this should have a break clause. It is designed to recompense the bidder if, through no fault of its own, a deal doesn't go through."

Allied is selling the pubs in order to focus on its spirits brands, which include Beefeater gin and Ballantine's whisky.

With Whitbread's exclusive negotiating rights expected to run out next week, Mr Osmond is hoping for access to the same confidential information on Allied before finalising his bid. He is also close to agreeing the sale of a 45 per cent stake in Punch, owned by US investment bank Bankers Trust, to the US buyout specialists Texas Pacific.

Meanwhile Allied confirmed that Berkshire Hathaway, the investment vehicle of Warren Buffett, has taken a 2.2 per cent stake in allied. The City has speculated about the identity of Mr Buffett's target since he revealed his interest in a British company on a visit to London.

The Allied spokesman said: "It is very pleasant to see another long-term investor on our shareholder list."

Allied shares rose 25p to 555.5p after news of Mr Buffett's stake was confirmed.