LONDON (Reuters UK) - Britain's second-largest pub firm Enterprise Inns (ETI) got the go ahead from the government to convert to tax-efficient property status on Wednesday, in a move expected to drastically change the way pub firms are structured.
Shares in Enterprise, which has 7,700 pubs, jumped 29 percent and sector rivals leapt as well.
"This is a great result for shareholders," broker Panmure Gordon analyst Douglas Jack said by phone.
The news boosted a sector that has been flagging as customers tighten their belts, and could stimulate the takeover of pub firms that do not change their structure.
Shares in Britain's largest pub company Punch Taverns (PUB), with 7,600 tenanted pubs -- out of 8,500 -- that could be split off into a special low-tax vehicle called a real estate investment trust (REIT), jumped 11 percent.
Greene King (GNK), with 2,500 pubs, jumped 10 percent.
Marstons (MARS), which has said it is unlikely to convert to a REIT because of the costs involved, soared 18 percent as this stance could make it vulnerable to a takeover, Jack said.
Enterprise had been in talks with the Treasury for around a year while the rest of the sector looked on.
"Enterprise will get a one-off tax benefit in the first year of 114 million pounds and 65 million pounds per year afterwards," said Panmure's Jack.
"And they will have to pay out the vast majority of their profits as dividends. If other pubs don't go through with this it will make them more of a takeover target."
To qualify for the tax benefits of becoming real estate investment trust (REIT), firms must get at least 75 percent of their revenues from rent and Enterprise was working on ways to get things other than just landlords' property rents included.
The move means Greene King and Punch are likely to try and follow suit having watched Enterprise's progress with interest over the last year.
It also means the trio are likely to split their businesses between managed pubs and operating divisions, and the REIT friendly tenanted pub division.
"Enterprise is progressing the detailed analysis required to decide whether the board will recommend to shareholders at an EGM (extraordinary general meeting) that it should elect into the REIT regime," it said, adding it expects this to take several months to complete.
Punch, Greene King and Marstons were not immediately available for comment.
(Reporting by Chris Wills and Marc Jones; Editing by Stephen Weeks/Richard Hubbard)
