Capital pubs chain set to be sold for £30m

Mr Waugh is believed to be selling a number of popular Edinburgh venues, part of his Festival Group business, to the Glasgow nightclub owner Stefan King for about 30 million.

The deal will be Mr Waugh's second in a week, following the sale of his Scotbet chain of 65 bookmakers shops to its management and a duo of gambling industry veterans for an undisclosed sum.

Mr King, who owns a number of high-profile nightspots in Glasgow, including Arta and the Corinthian in the Merchant City, will substantially increase his presence in the capital by acquiring Mr Waugh's Festival Inns, including the Three Sisters in Cowgate, Biddy Mulligans in Grassmarket, Bank Hotel on the Royal Mile and the Murrayfield Hotel close to the national rugby stadium. It is thought Mr Waugh is retaining part of the company, which will be renamed Waugh Taverns. His other interests include the Raeburn Hotel and the Hudson chain.

Mr Waugh, the son of the former Hibernian FC chairman of the same name, has been looking for buyers for his various businesses for the past year as talks with his bank, shareholders and others parties searched for ways to cut the group's mounting debt and losses.

Accounts to the end of July 2009, the last filed, show the group owed 46.2 million to Clydesdale Bank and that pre-tax losses rose from 6m to 11.4m. Festival Group breached its banking covenants - or terms of agreement - and it is thought that Mr Waugh planned to raise more than 40m from asset sales.

Mr Waugh did not reply to calls, but a spokesman for Mr King's G1 Group said: "It is true that we are currently in negotiation with Kenny Waugh to join forces. Negotiations are ongoing and it would be wrong to go beyond that in relation to particular units and impact on personnel.

"The principals see the strength of the partnership, which will be centred on the geographic coverage of each company."

Mr Waugh formed pubs business Thistle Inns in 1990 with his cousin Billy Lowe, and seven years later they sold it to brewing giant Scottish & Newcastle for 20m, setting up Festival Inns. Apart from the Edinburgh venues, they built a chain of bars and clubs in Bridge of Allan, St Andrews and Aberdeen.

Mr King is best known for his pubs, clubs and cinema interests in Glasgow and there has been speculation that he has been in talks with Royal Bank of Scotland to acquire BBC Scotland's former headquarters at Queen Margaret Drive in the West End of the city. However, it is thought Mr King may have gone cool on the idea, particularly after the backlash he received from local residents over a previous attempt to open a nightclub in the nearby Botanic Garden.Meantime, he has been busy expanding his interests in the fashionable bar and club scene in Edinburgh, acquiring Bennets near the King's Theatre, Ghillie Dhu in Rutland Place, Granary in Leith and GHQ in Picardy Place. He will now see his estate in the city move into an area better known for weekend stag and hen parties.

The new owners of Scotbet - the trading name of Morrisons bookmakers - said this week they had been in talks for the past 12 months with Mr Waugh.

Former Tote chief executive and gambling consultant John Heaton becomes Scotbet's executive chairman while Graham Martin, former chairman of the world's leading mobile gambling business Probability Games Corporation, takes on the role of chief executive.

Also joining the new Scotbet board is Mike Dickson, owner director of Dickson Corporate Management, who has been an adviser to the company. Together with Festival Group chief financial officer Richard Spanner, they aim to take the brand global by improving its online and high street presence.