Outlook: Allied/Whitbread

SHAREHOLDERS could scarcely believe their luck. Not only has Allied Domecq finally been able to execute the deal with Whitbread which allows the demerger of the company's pubs and retail business, but it has got rid of Tony Hales, its beleaguered chief executive, too. As one fund manager unkindly put it, which is the icing and which is the cake is not entirely clear.

With Hugh Osmond's Punch Taverns promising to top Whitbread's all shares purchase, there may be more to come. Mr Osmond argues a good case, but he is only half right in insisting that Allied should have more thoroughly tested the market first for rival offers before committing itself to Whitbread. The extra month of exclusivity that Whitbread now enjoys was a condition of the deal; Allied would have been silly to give up the certainty of Whitbread's bird in the hand for Mr Osmond's bird in the bush. By committing to Whitbread, Allied has secured a firm offer. Mr Osmond's is still just a prospect.

But he's right on another score. Whitbread's offer hardly looks generous, and though this is being billed as a demerger, Allied still has a duty to ensure its shareholders get the best deal possible.

Moreover, he may be right in questioning the feasibility of Whitbread's consequent sale or flotation of brewing assets. Without a continuing tie to Whitbread, the breweries may be worth nothing. Indeed the disposal could easily result in a sizeable write off.