Joining forces

Related tags Beer Due diligence

W&DB hopes to snap up Lake District-based Jennings. John Porter reports.The Wolves are hunting once again. This time, Midlands-based...

W&DB hopes to snap up Lake District-based Jennings. John Porter reports.

The Wolves are hunting once again. This time, Midlands-based super-regional Wolverhampton & Dudley Breweries (W&DB) has veteran Lake District brewer Jennings firmly in its sights - and, far from putting up a fight, the prey is happily rolling over to have its tummy tickled.

A joint statement from the two companies has made it fairly obvious that, unless the due diligence process turns up any unexpected gremlins lurking in Jennings' accounts, we can expect a recommended offer from the board of the Cockermouth-based company in short order.

W&DB chief executive Ralph Findlay certainly expects things to proceed smoothly from here on. Behind the scenes, talks have clearly been going on for some time. "We only have a few more things to clear up on the due diligence," Mr Findlay (pictured) told The Publican. "And we certainly hope we'll be announcing a formal offer within a couple of weeks."

At the proposed level of 430p a share, a bid would value Jennings at around £46m. That's somewhat small potatoes compared to the £120m W&DB paid to add the 460 Burtonwood pubs to its estate at the start of the year, and around half the £90m paid for Wizard Inns in 2004.

Since Wizard had fewer pubs than Jennings - 63 compared to 128 - and no brewing arm, it looks on paper as though W&DB over-paid for one of those acquisitions or will be getting a real bargain with the other. It needs to be borne in mind that the managed Wizard pubs were mainly in high-turnover town centres, whereas the tenanted Jennings estate is weighted toward rural and village pubs.

In fact, the City believes the proposed price for Jennings is fair, a view clearly shared by North-Western brewer Frederic Robinson, which was canny enough to build up a 24.1 per cent stake in Jennings in 2003, at a time when the shares were seen as undervalued. Now the largest single shareholder in Jennings, Robinson has already agreed to sell its stake to W&DB.

Jennings' chairman John Rudgard said: "We believe that, if final terms can be agreed, W&DB would provide a good home for Jennings.

"Jennings' high quality pub business and strong brands represent an excellent geographical fit with W&DB's existing operations. The deal would protect and develop Jennings' heritage within a far larger and stronger group."

Some might be forgiven for wondering if the Jennings pubs are a bigger draw for W&DB than the beers. With its core Banks's brand, as well as Marston's and Mansfield - acquired with previous takeovers - W&DB seems to have a packed cask beer portfolio. When W&DB acquired Camerons in the early 1990s, the pubs were the main draw, with the Lion Brewery in Hartlepool and brands including Camerons Strongarm later sold on to Castle Eden.

Mr Findlay clearly likes the Jennings pubs. "They're high quality, well-run community pubs," he said. "Just the kind we like to operate." However, W&DB has said that it would keep the Castle Brewery in Cockermouth open, as it sees scope in brands such as Cumberland Ale and Cocker Hoop.

"At the moment, they're good, well-regarded local brands," said Mr Finlay. "We think there are real opportunities to expand them into national distribution."

The players

Wolverhampton & Dudley Breweries