Property tycoon Robert Tchenguiz is emerging as the front runner ahead of Punch Taverns for the multi-billion pound Spirit pubs group out of four final bidders.
Mr Tchenguiz is allegedly offering around £2.8 billion through his R20 investment vehicle, while Burton-on-Trent-based tenanted pubs group Punch has put in a final bid of £2.6-2.7 billion, it was claimed yesterday.
However, sources say Mr Tchenguiz may be forced to cut his price as Spirit's complex financial structure is unravelled.
"Punch's bid is seen as a final offer, so Tchenguiz is very much in the driving seat. Much depends on whether he has to drop his price," said one industry watcher.
Punch, which runs over 8,000 tenanted pubs, has shareholder approval for its offer, but Spirit's advisers hope Mr Tchenguiz will firm up on his package and complete a deal before Christmas.
Mr Tchenguiz has a string of pubs including Slug and Lettuce, Yates and Hog's Head, and at the end of last year bought 354 of Spirit's smaller pubs for £345 million.
He has greater firepower set against listed Punch, it is claimed.
A number of issues with Spirit still need to be hammered out over tax, pension liabilities and swaps deals to be unwound, but Spirit is pushing for a resolution before the year-end as the process is distracting for its pub management team.
"Spirit is eager to keep the tension between Tchenguiz and Punch to prevent the price slipping," said a commentator. "Punch has the support of its investors, but Tchenguiz has the potential to pay more."
The private equity owned Spirit, which includes the Chef and Brewer pub chain, is said to have received four firm bids by Monday's deadline from the British billionaire Barclay Brothers and Clearbrook Capital, the private equity group run by former WestLB banker Robin Saunders, as well as Mr Tchenguiz and Punch.
Spirit, which is one of Britain's largest managed pubs group with 1,832 outlets, was initially valued at £3 billion, but the value has slipped as it has made disposals, and only two months ago offloaded 177 high street pubs and bars to Jon Moulton's Alchemy Partners private equity group for £177 million.
In addition, Spirit has suffered from uninspiring pub trading under the weight of £2.1 billion of debt and its private equity owners are now eager to crystallise a value from their investment.
Of the other bids, Ms Saunders has held talks with Stella Artois brewer InBev over a beer supply deal for the pubs, but is not seen as leading contender, while the Barclay Brothers' last minute bid was around £2.3 billion.
One concern over the Saunders' bid is that Scottish and Newcastle already supplies nearly half of Spirit's beer in a seven-year deal until 2010 which has a break fee "well north" of £50 million, industry sources said.
A Spirit spokeswoman declined to comment on the situation but said: "We have received several bids which are being evaluated by the board of Spirit and its adviser Merrill Lynch." All other parties declined to comment.
If Mr Tchenguiz wins he is likely to extend the beer supply deal with Foster's and Kronenbourg brewer S&N which he struck when he bought the 354 smaller Spirit pubs last year.
Spirit is owned by private equity groups Texas Pacific Group, the Blackstone Group and CVC Capital Partners, along with investment bank Merrill Lynch, with the management holding a small stake worth up to £50 million.
It was formed after Hugh Osmond, backed by private equity groups, bought the Allied Domecq pubs estate in 1999.