Publicans' co-op signals intent to go online for drinks discount

Bartrader, the pub co-op led by hotelier Mr Hugh O'Regan, entered tentative negotiations last month to buy PubXchange.com, a start-up venture which offers pubs an online ordering facility for supplies.

The proposed deal valued PubXchange.com at some £4.1 million (€5.2 million) at one stage, although this was subject to due diligence and performance-related clauses, among other conditions.

The deal also included share options in Bartrader for PubXchange.com's five directors. If Bartrader's business was floated on the stock exchange, it is thought the shares would be valued at more than £4 million. Two senior PubXchange.com directors were to work for Bartrader under this aspect of the agreement.

It is thought there were two att empts to reach agreement between Mr O'Regan and PubXchange.com, but the negotiations broke down. Contact was initiated before either firm formally launched its business.

Bartrader claims more than 300 members in the pub business throughout the State. Its backers include publicans Mr Liam O'Dwyer of Capital Bars and Mr Louis Fitzgerald, who owns several premises in Dublin. Mr O'Regan's interests include pubs Thomas Read's and Hogan's, and the Morrison Hotel, all in central Dublin.

From October, Bartrader hopes to use its members' collective bargaining power on an Internet-based system to secure discounts from drink manufacturers.

In the High Court yesterday, the group was granted short service of an interlocutory motion against Guinness Ireland, restraining the brewer from abusing its dominant position in the market for the sale of stout. The matter may return to the High Court next Thursday.

PubXchange.com markets itself as a business-to-business portal site for the catering industry. It claims some 48 contracts with pubs and is negotiating a second round of financing.

Its leading financial backer is a businessman and IDA board member, Mr Nial Ring, and other board members include Mr John Tuite, a retired sales and marketing director at Beamish & Crawford, and Mr Patrick Reynolds, an IT specialist. Its managing director, Mr Richard Finnegan, and another director, Mr Hugh Grainger, were to work for Bartrader or related companies under the proposed deal.

People close to the negotiations said difficulties arose regarding the due-diligence aspect of the deal, among other matters. It is believed Mr O'Regan was unhappy with a proposal by PubXchange.com to expedite the process by appointing an arbitrator to examine matters of difference which arose in the examination.

After the initial discussions broke down, it is thought the discussions between both parties recommenced after a chance meeting between Mr O'Regan and Mr Finnegan. Following further talks, an agreement proposed on May 29th included the following elements:

payment of a £100,000 deposit on May 30th;

payment of £1.5 million on June 27th;

payment of £2.5 million on February 28th, which was subject to performance-related clauses.

Separately, this deal involved share options potentially worth £2.5 million for PubXchange.com's financial backers. Mr Finnegan and Mr Grainger stood to gain options worth £1 million each under this element of the deal, if they worked for Bartrader or its related companies. These conditions were dependent on the flotation of Bartrader.