Pubmaster renews attack on Wolves

The battle for Wolverhampton & Dudley Breweries (W&DB) is heating up after its directors stepped up their defence against a hostile offer.

As reported on thePublican.com on July 23, the brewer has pledged to raise £135m by selling some of its pubs and to return £100m to shareholders by the end of this year.

It aims to challenge pub group Pubmaster which is in the final stages of a hostile takeover bid for the company, valuing it at £453m.

But Pubmaster's chief executive John Sands (pictured)​ alleged that the new promises to W&DB's shareholders would still lead to high debt. He also questioned the brewer's retail strategy in focusing investment on roll-out of a new pub concept called Bostin' Local.

He said: "W&DB management has dreamt up this strategy based on further borrowings and promises of future cash to W&DB shareholders in addition to funding yet another ill-advised retail concept.

"W&DB shareholders should be cautious about believing in more promises from W&DB management and a strategy that will leave the company over geared, under capitalised and with a market capitalisation so small that it will fail to attract wide investor support."

W&DB has suffered the blow of losing its director of pub retailing, Patrick Dardis. He has resigned to join a new internet venture which is to be launched by Nomura Principal Finance Group to provide services to the brewing industry.

Although Mr Dardis is not on the board, he is involved in developing the pub estate, which includes the core Bostin' Local brand.

Mr Sands said: "W&DB's brands business is in steady decline and it is naive of W&DB management to believe that shareholders should back another new retail strategy particularly when W&DB's retail director has just resigned."

At the end of last week, Pubmaster revealed that it had so far received backing from shareholders with a total stake of only 9.8 per cent.

With the final deadline for acceptances on August 13, the pub operator has until July 30 to raise its offer. However, it has so far refused to do so despite pressure from shareholders to go as high as £500m.

W&DB has received indicative offers for 112 of the 170 pubs that it has earmarked for disposal, which would raise £121m. It predicted the total proceeds from the whole package, which includes the Pitcher & Piano chain, would be about £135m. Regent Inns is believed to have agreed a deal to buy the Pitcher & Piano bars.

W&DB has predicted how much it will grow over the year to September 29, 2001, claiming pre-tax profits would be up by 16.9 per cent to £76m.

It also revised the promise it made in April to return £200m to shareholders within two years through a share buyback. It has decided to launch a £100m tender offer within six months while still paying the remaining £100m before April 2003.

A tender offer would be more attractive for private investors since it allows all shareholders to sell their stock for the best price, while a share buyback would favour larger institutional investors.

W&DB chairman David Thompson said: "'Our profit forecast demonstrates the good underlying trading improvements we have achieved since March last year despite the distractions of being in an offer period for nearly a year.

"Current trading is good. We have a clear and proven strategy in place to exploit the core strengths of the business while returning up to £200m in cash to shareholders.

"Pubmaster's offer represents poor value for W&DB's strong cash generation, valuable assets and improved trading outlook and completely fails to take account of the sector re-rating over the last year."

The pub and regional brewer sector has enjoyed a 40 per cent uplift in share values on the stock exchange since Pubmaster launched its bid.

The takeover battle, which formally started nearly 12 months ago with an approach by pub and restaurant group Noble House Leisure, has become increasingly bitter. Last week, it moved to the High Court when W&DB accused Pubmaster of releasing confidential information about its breweries to rivals Carlsberg-Tetley and Bass Brewers.

Related stories:

Wolves steps up defence against Pubmaster (July 23, 2001)

Pubmaster gains less than 10 per cent backing for Wolves offer (July 20, 2001)

Wolves begins court action against Pubmaster (July 17, 2001)

Wolves launches defence against Pubmaster (25 June, 2001)