The proposed deal still has to be approved by Punch shareholders

Pubs group Punch Taverns has agreed to buy privately-owned rival Pubmaster in a deal worth �1.2bn.

The move, if approved by shareholders later this month, will make Burton-on-Trent-based Punch one of the biggest players in Britain's fast-consolidating pubs sector.

Punch, which reported a 22% rise in pre-tax profits to �113m ($189m) for the year to August, said the deal could save it �10m a year.

The combined firm will own around 7,600 leased and tenanted pubs making it significantly larger than the empire of 4,515 pubs owned by Punch at present.

This is a tremendous deal which reflects the quality of the Pubmaster business built over the last 10 years Pubmaster chief executive John Sands

If the acquisition goes ahead Punch will sell 206 pubs from the new, combined group, to address potential competition concerns.

Describing the acquisition, Punch Taverns chief executive Giles Thorley said: "The Pubmaster Estate provides an excellent strategic and geographic fit with our existing portfolio and nearly doubles the size of our estate."

Pub development

Hartlepool-based Pubmaster, which specialises in "community locals", said it had not been looking to sell the business before receiving an offer from Punch.

Executive chairman John Sands said the deal would allow for further development and expansion of the Pubmaster pubs.

He said: "This is a tremendous deal which reflects the quality of the Pubmaster business built over the last 10 years."

The proposed deal, which needs to be approved by Punch shareholders, is expected to be completed on 28 November.

In October, Scottish & Newcastle, the UK's biggest brewer, sold its pubs and restaurant business to British hospitality firm Spirit Amber Bidco.

S&N, maker of the top-selling Kronenbourg and Fosters lager brands, sold its retail division to Spirit for �2.5bn ($4bn).