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Dancing With Wolves
by John Cryne
Disturbing news for the regional brewing industry has come with an
opportunistic approach from a private equity company to acquire
Wolverhampton and Dudley Breweries. For the moment, Wolves has knocked
back the approach but for the less than robust reason that the offer
undervalued its business and was "too uncertain" to pursue. This seems to
leave open the possibility for future, perhaps unwelcome, developments.
Over the last year, Wolves has embarked on an ambitious take-over spree,
swallowing up the Marston's (brewers of Pedigree) and Mansfield breweries,
to add to its existing breweries, Banks's in Wolverhampton and Cameron's
in Hartlepool. This has led to the company being saddled with huge debts
– over £600m – and there could well be pressure from some shareholders to
take the cash on offer as a good exit price.
This could mean bad news for the drinker. As an operator of four breweries
and an enthusiastic supporter of lined glasses, CAMRA needs Wolves to
prosper in its current form. It does not need it to be acquired by people
more interested in cash flow than beer flow. Put simply, the current range
of beers and breweries would come under severe threat as the buyers looked
to maximise returns through generating rental income from the pub estate:
a return that might be enhanced by closing breweries and entering into
supply agreements with a national such as Carlsberg Tetley.
The fact that one of the players in the offer, Robert Beare, is the former
head of Alchemy backed pubs group InnSpired, which recently closed Ushers
of Trowbridge, hardly gives real ale drinkers cause for cheer.
There has been speculation that Wolves' board is considering a management
buyout but their directors could struggle to raise the finance with the
level of debt. It seems odd to the pub drinker that a company that has been
so acquisitive is lowly valued in the City (trading at a discount to its
net asset value) supposedly because equity investors have little interest
in a company that has failed to create a successful growth strategy.
It's a shame that making things, indeed making something close to the heart
of large numbers of consumers, is no longer exciting for investors. While
Shakespeare may have said, "Blessing of your heart - you brew good Ale",
it seems this is no longer good enough for some.
John Cryne.
Reproduced from the Full Pint, Issue 6.
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