The chief executive of Punch Taverns, Britain’s biggest pub company, yesterday dampened any lingering hopes of a deal with Mitchells & Butlers (M&B), the operator of All Bar One and Harvester.

Giles Thorley, who has withdrawn from talks with M&B twice in the past month amid angry exchanges, said that although Punch had left the door open to fresh discussions after last week’s withdrawal, he felt a transaction was now highly unlikely.

“I can’t see the circumstances where that could happen,” he said. “It would have been irresponsible not to reserve our right [to return], but we’ve got plenty of things to be getting on with.”

Mr Thorley admitted that he had become weary over the acrimonious nature of the exchanges. “We tried to avoid making it personal because ultimately it’s about whether a deal is there to be done.”

Mr Thorley suggested that Tim Clarke, the M&B chief executive, might now opt to pursue an asset swap with Whitbread as a means of “getting out of prison”. Asked to elaborate, he said he felt that the £391 million hedging loss reported by M&B after the collapse of a property joint venture with Robert Tchenguiz’s R20 had left Mr Clarke “at the door of the prison”.

The hedging loss forced M&B to launch a strategic review, prompting Punch to put forward an abortive proposal for a full-blown merger with M&B. Mr Clarke then turned the tables on Mr Thorley by approaching him about the possibility of acquiring Spirit, Punch’s managed pub division.

Mr Thorley confirmed that, following the collapse of the second proposal, Punch had been contacted about Spirit by Orchid Group, formed two years ago from the purchase of 290 pubs from Punch. “They rang our advisers and we said no. Spirit is not for sale. Certainly not in these markets.”

He said that retaining Spirit did not rule out a possible conversion to a real estate investment trust (Reit) and the company continued to discuss the issue with HM Revenue & Customs.

Punch yesterday reported a 1 per cent increase in pretax profits before exceptionals to £133 million in the half-year to March 1, as turnover fell 12 per cent to £813.5 million. Including exceptionals, profits fell 21 per cent to £109 million.

Punch said that the figures reflected the difficult trading conditions faced by the pub sector after the smoking ban, fragile consumer confidence, rising fuel and energy costs and beer duty. The results were also affected by disposals, which reduced the size of Punch’s pub estate by 9 per cent to about 8,400 outlets.

Mr Thorley said that it was difficult to disaggregate the impact of the smoking ban from consumer spending trends. “I don’t think we can differentiate the two, though fewer people are going to pubs.”

Like-for-like sales at Spirit fell by 2.8 per cent while its tenanted and leased estate reported a 2 per cent decline in comparable profits. Mr Thorley said that beer volumes had fallen in line with market decline of about 10 per cent, although he expected them to return to normal during the summer, after the first anniversary of the smoking bans in England and Wales.

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