Hall & Woodhouse's suprise takeover of King & Barnes

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Dorset's Hall & Woodhouse hit the headlines with a surprise takeover of King & Barnes.The news of the impending closure of King & Barnes'...

Dorset's Hall & Woodhouse hit the headlines with a surprise takeover of King & Barnes.

The news of the impending closure of King & Barnes' historic brewery sent shockwaves through the ranks of real ale lovers and licensees in Sussex.

The future of the Horsham brewery had been in doubt since last September when its Kent rival Shepherd Neame unveiled a hostile bid, believed to be worth £15.5m.

At first, the Neames promised to keep the brewery open but it later became clear that this would not be a viable option.

Last month, the Sussex brewer's chairman Bill King and his relatives chose to turn their backs once and for all on their former friends in Kent and turned to a white knight.

Hall & Woodhouse, nearly 90 miles away in the Dorset village of Blandford St Mary, had been judged by outsiders as too distant to be rated as a likely alternative.

But King had approached managing director David Woodhouse, his colleague at the Independent Family Brewers of Britain (IFBB), in February to suggest a friendly bid.

Once Shepherd Neame had increased its bid to £23.63m — 50 per cent more than its initial offer — Hall & Woodhouse stepped in with an offer of £23.75m, just £120,000 more.

The offer included a proposal to close the Horsham brewery, with the loss of 50 jobs, which led to an outburst of anger from the Campaign for Real Ale — until it emerged that Shepherd Neame had decided it would have to close the brewery as well.

Now that the deal has been completed — due diligence took just four days when it would normally take at least four weeks — it turns out to be a sensible fit.

And it has emerged that Hall & Woodhouse was eager to expand its pub estate to protect the future of its own 100-year-old Badger Brewery.

Over the past three years, production of beer and soft drinks has dropped from 1.5m hectolitres a year to just over 1m, hit by the loss of brewing contracts and listings with Tesco and Asda.

Like others, it has also suffered from the annual 13 per cent decline in cask ale volumes and the strength of the pound, which has dented exports.

With production well below the brewery's 400,000 barrels, brewery director Mark Woodhouse said the acquisition of King & Barnes' 65 pubs and its ales would provide a useful boost.

"We need every barrel that we can possibly get to put through out own brewery," he said.

"All of our shareholders are very committed to brewing. There would be a riot if we said we wanted to get out of it.

"Anything that enhances our ability to stay in brewing and be competitive would get our shareholders' support."

Hall & Woodhouse is not new to East Sussex. It has owned pubs in the country for nearly two decades, including the Boar's Head Tavern in Horsham itself.

By the end of next month it will have seven pubs in East Sussex after it opens a major new development, Goff's Manor, in Crawley.

Hall & Woodhouse's 200 pubs are in a similar market as King & Barnes — unbranded, traditional and serving real ale.

But, while the Dorset company has been continually investing in its estate and developing food, the Sussex pubs are generally wet-led and under-invested.

Woodhouse said: "There has been little or no investment in the King & Barnes estate so we do intend to invest in them."

But he said Hall & Woodhouse would not be striding in and telling the tenants to change their business, such as forcing them to upgrade their food offer.

"The average barrelage is very good, so they can't be doing that much wrong, but we would like to offer them a bit more help," he said.

As a member of the IFBB, Hall & Woodhouse is firmly committed to the traditional tie and has been transferring 90 of its managed houses to tenancy.

"One of the most attractive things about King & Barnes is that they have tenancies which offer more secure income streams," Woodhouse said.

He said it had a policy of prudent investment in its existing pubs since this usually offered the best returns on investment.

A recent example is the Charlton Inn, a tenancy near Blandford, which has increased sales by 20 per cent after a £50,000 extension and refurbishment. This is matched by a phased increase in the tenant's rent.

Prudence may not immediately seem the right word for its acquisition of King & Barnes, but this appears to be its first takeover of another brewer for over a century.

Its biggest acquisitions over the past few decades have been two packages of four pubs, one from multiple operator Terry Cooper in the 1970s and another from Harmony Leisure in the 1980s.

While the core estate stretches from Weymouth, Dorset to Chichester, West Sussex, it now extends as far as Buckinghamshire and Somerset, including 25 in London and within the M25.

Woodhouse said: "We have been struggling to acquire as many pubs as we would have liked because getting good sites is very difficult, so this is a big step forward for us.

"Other companies were overpaying for packages that weren't of a good enough quality, but we avoided that for piecemeal acquisitions.

"By being prudent and keeping our gearing down, we were able to seize this opportunity."

The takeover has increased its borrowings but Woodhouse said gearing was at a "modest" level.

"This acquisition adds significant value to Hall & Woodhouse," he said.

The company is still 100 per cent controlled by the descendants of Charles Hall, who founded the business in 1777, and his partner George Woodhouse.

With the fifth generation at the helm, there are now 55 shareholders from the Woodhouse family tree — and, according to Mark Woodhouse, "the base of the pyramid is getting wider".

"A lot of shareholders are not employees in the business now and we have to ensure that those not involved believe we are looking after the family silver," he said.

Although this allowed the company to look at the business with a more long-term strategy, it is still benchmarked by the board against listed brewers on the FTSE-350.

And, while it may not have City analysts breathing down its neck, two of its family shareholders are prominent figures in the City, including Anthony Woodhouse who is a non-executive director at investment group Schroders.

If takeovers were not enough to occupy its management team, the Badger Brewery has been carrying out a major redesign of its beer branding.

This has seen more distinctive imagery for its cask ales Badger Best Bitter, Badger IPA, Badger Champion Ale and its premium ale Tanglefoot. It is also due to launch a new version of its session ale, Badger Best, next month.

It is currently reviewing King & Barnes' ales, which will be transferred to Blandford "once the beers have been matched to the satisfaction of local drinkers and licensees".

This move will not only see the closure of the Horsham brewery, estimated to be worth up to £3m, but probably the death of smaller ale brands. Sussex Bitter is its biggest-selling ale, trailed by Festive.

The King & Barnes beers will find themselves part of a very diverse business. Not only does the Badger Brewery produce its own lager, Hofbräu, under licence from a 400-year-old Munich brewer, but it is also a leading manufacturer of soft drinks with its Rio and Panda brands.

If this were not enough, it has a packaging line, a wine and spirit distributor and nine off licences in Dorset.

"No other brewer has quite the same complex and diverse business as us," Woodhouse said.

"While we've made some exciting developments, our strategy remains the same — to continue as an independent family company producing high-quality drinks."

Related topics: Other operators

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