Punch Taverns is the frontrunner in the £2.5 billion race to buy fellow pub operator Spirit.

The Staffordshire-based group - Britain's second biggest pubco with 7,200 sites - is thought to be among the suitors when the second round of bidding begins today.

Punch's offer is also believed to include an agreement to take on Spirit's £400 million debt and its £80 million pensions deficit.

It has emerged as frontrunner after Australia's Macquarie Bank pulled out, although Punch, which is led by Giles Thorley, still faces competition from property tycoon Robert Tchenguiz and former WestLB financier Robin Saunders.

Mr Saunders, is reported to be backed by brewer Inbev for Spirit, which operates 1,832 sites around the country.

Final bids for Spirit must be lodged with the company's financial advisor, Merrill Lynch, by noon today.

Spirit's pub estate, now owned by venture capital firms Texas Pacific, CVC, Blackstone and the private equity arm of Merrill Lynch, was formerly owned by the drinks groups Allied Domecq and Scottish & Newcastle.

But the size of the Spirit's estate means that any pubco would have to sell part of it to meet Government competition regulations.