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Pubmaster promises are illusory, says firm W&D.

Byline: Philip Williams Deputy Business Editor

Wolverhampton and Dudley Breweries yesterday unveiled its defence against the hostile bid from Pubmaster, branding Pubmasters' promises to shareholders 'illusory'.

W&D, which also owns Marstons in Burton-on-Trent and Mansfield Breweries, says Pubmaster's 480p a share bid undervalues the beer-and-pub company which has shown better trading over the last 12 months, and falls short of Pubmaster's earlier indicative bid of 510-515p.

'Pubmaster knows that W&D is worth much more than it is offering,' said chairman David Thompson.

'480p is not a serious offer: it takes no account of the sector rerating, the inherent value of W&DB, our strong recent and current trading performance, or our future potential, and it certainly does not offer shareholders an adequate premium for control.

'It is an attempt by Pubmaster to acquire W&DB on the cheap, at the expense of our shareholders, and the board strongly urges them to reject the offer.'

W&D said the offer represented a price earnings multiple of 8.4 times compared with the average price earnings multiple for comparable companies of 14.6 times.

It represented a six per cent reduction in income for investors.

The offer did not take account of the 25 per cent increase in W&D's interim earnings per share compared with the previous interims.

Neither did not take account of the increase in share prices of comparable brewing companies'average increase of 38 per cent since August 11, 2000 - more than the premium which Pubmaster claims for its offer.

Under Stock Exchange takeover rules, W&D had until day 14 of the bid process, or this Thursday, to submit its defence document to argue against the pounds 453 million hostile bid within the UK's 60-day takeover timetable.

However, many analysts and fund managers say Pubmaster will win the battle only if it raises its bid well above 500p after a 10-month long bidding saga over the future of the 111-year old group which runs four breweries and some 1,770 pubs.

They expect the bid process to move quickly, as if the bid takes the full term, many fund managers and other shareholders will be on summer holidays by day 60 - August 13.

Major shareholders, which include US fund Silchester with 11.3 per cent, Britannic with 7.2 per cent, US fund Tweedy Browne with 5.5 per cent and M&G with 5.1 per cent, are looking for an increased bid of around 520p, the sources added.

'A bid at 480p really is not in the right ball park, we would look for something well above 500p,' said fund manager Philip Graves at Britannic.

However, analysts say the market is not convinced Pubmaster can come up with a much bigger bid with the target shares trading well off the all-time closing high of 618-1/1p in July 1999.

Pubmaster, 40 per cent owned by German bank WestLB, plans to sell 290 of W&D's biggest pubs to old rival Robert Breare for pounds 250 million if its bid is successful, and also put the four W&D breweries up for sale.

It said W&D had failed to actively integrate its acquisitions and had adopted a 'reactive approach to divesting and re-classifying its underperforming assets, many of which have had substantial investment in the past'.

Pubmaster said its 480p per share offer provided certainty and represented a multiple of 34 times W&D's 2000 basic earnings per share.

'The claims made fail to grasp the enormity of the problem facing W&D and therefore lack credibility,' said Pubmaster chief executive John Sands.

'W&D would clearly like to have the stock market rating of other efficient lean and geographically focused peers. For very good reasons W&D does not deserve a similar rating to better performing companies in its sector,' he said.

Analysts believe the brewing side, which made an operating profit of pounds 20.3 million in its last financial year, could raise some pounds 60 million.

W&D launched its own strategic plan in April to sell off two of its four breweries, Mansfield and Hartlepool, cull jobs at Marstons, sell off 170 pubs and return pounds 200 million to its shareholders over the next two years.
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Publication:The Birmingham Post (England)
Date:Jun 26, 2001
Words:706
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