Derek Pain: Fuller indicative offer rejected as predators round on CapitalPubs

No Pain, No Gain

Fuller indicative offer rejected as predators round on Capital Pubs

At one time, the no pain, no gain portfolio reaped rich rewards from corporate activity. For some years before the banking crisis erupted, there seemed to be an insatiable desire to launch takeover offers and indulge in various forms of financial manoeuvring. Such exercises usually involved the accumulation of debt.

These activities were dealt a savage blow by the banking disaster. True, a few bids have appeared since those halcyon days but easy takeover pickings, despite indications that the old merry-go-round might be set to return, have yet to materialise.

The last portfolio constituent to fall to a predator was brewer Scottish & Newcastle, which three years ago succumbed to a combined assault from Carlsberg of Denmark and Heineken of Holland. I was, therefore, delighted when the long drought ended with another beer episode as Fuller, Smith & Turner, brewers of London Pride, rolled out what appears to be a bid for The Capital Pub Co, a pub chain recruited to the portfolio in January.

As I write, Fuller has not actually produced a bid. Its indicative offer of 200p a share has been rejected by the Capital board, because it believes it undervalues the company.

Whether Fuller goes hostile or not remains to be seen. I sympathise with the pub group. It has some splendid outlets and enjoys something of a rarity value as it is one of the few remaining quoted independent chains.

In recent months, other similar but unquoted groups have fallen, with Young & Co absorbing the 26-strong Geronimo chain for £60m and Greene King splashing out £53.3m for the 14 London outlets of Realpubs and £55.8m for the 12 sites of Cloverleaf.

Admittedly, these three captures were largely food-led pubs, whereas Capital's 34-strong estate has a more pronounced drink affiliation. Still, on the surface, Fuller's offer, capitalising Capital at £53.9m, seems to be rather tight fisted.

There is little doubt the price of quality London pubs is increasing.

The industry may be in the doldrums nationally but many top sites in and around London are, in relative terms, thriving. And Capital's enviable establishments are in London or nearby.

The number of successful pubs still available to any ambitious brewer or pub group is dwindling dramatically. Although Fuller should – and I suspect would – be prepared to pay more, there is every chance Capital will attract attention from other drinks players.

One predatory candidate must be Marston's, another portfolio constituent. The Brakspear and Pedigree brewer is rather thin on the ground in Capital territory and, although heavily borrowed, could see the logic of swallowing its pubs. However, it could feel it has its hands full developing a spread of newly-built, food-led pubs. It has already undertaken around 40 and, from next year, hopes to create 25 such outlets every 12 months. Still, if Marston's should be stirred into action, it would be the first time one constitute has bid for another.

Other drink groups, including under-siege pub chain Greene King, could also be tempted, having arrived on the stock market in 2007. A sister venture, Convivial London Pubs, with eight outlets, is traded on the JP Jenkins-matched bargains market.

So far this year, Capital has acquired two London pubs and hopes to build its chain to around 50. The attraction of London is further underlined by Fuller's activities – it recently announced the acquisition of three pubs in the London area, including a house at Twickenham that I have been known to frequent and, I suspect, would have been an ideal addition to the Capital network.

This week Capital underlined its opposition to the Fuller assault. It reported adjusted profits up 48, per cent and a pre-tax figure of £3.5m against a £1.5m loss. The first dividend since 2008 will be 2.25p a share against earlier indications of 2.1p. And it unambiguously intensified its argument against the value Fuller's offer placed on the company.

The portfolio descended on Capital shares at 120p. After the profits announcement and spirited defence, the price hit the Fuller valuation of 200p. My guess is the brewer will have to increase its bid by a considerable amount if it wants to win the day.

yourmoney.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss