No Pain, No Gain: Hot profits are a symptom of takeover fever

The No Pain, No Gain portfolio is enjoying a heady bout of takeover fever. In the past couple of months, two of its constituents have succumbed to friendly deals and at least two others have been the subject of bid rumours. I think, given the circumstances, I can be forgiven for wondering which will be the next to go.

The two in the hand are Burtonwood, which has fallen to the Wolverhampton & Dudley Breweries, and Merrydown, the cider and Shloer adult soft drink group, where unquoted SHS has delivered a £36.7m offer. Allied Domecq and Scottish & Newcastle are the two that have so far merely attracted takeover gossip. The Merrydown deal values the shares at 170p, against the 35.5p portfolio-buying price. I suppose Merrydown's success is once again an example of patience being something of a virtue in the investment game.

I alighted on the shares in August 1999. I was impressed by new management which moved in as the group teetered on the brink of bankruptcy. Among those banking on a Merrydown comeback were brewer Shepherd Neame and the current bidder, SHS. They both took significant share stakes. Shepherd Neame eventually sold, barrelling a handsome profit. SHS went on to increase its shareholding.

The demise of Merrydown as a quoted company ends a rather romantic chapter in the history of the drinks industry, as well as the stock market. It was created just after the war by three former prisoners of war. They had perfected the art of fermenting cider and wine while they languished behind barbed wire. In its early days the business was famed for its exceedingly strong cider and a range of English fruit wines. On more than one occasion it went through the mill, before descending, rather disastrously, on a short-lived Australian alcopop, Two Dogs , in the 1990s. Perhaps it is fitting that SHS, which, among other lines, embraces the WKD range of alcopops, emerged as the bidder.

Talks took a long time to complete. They were first announced in November, reaching a conclusion , after other interested parties backed off, last week. In contrast, the Burtonwood deal was resolved in a few days, prompting suggestions that a higher price could have been obtained.

I opted to sell Burtonwood shares in the stock market, rather than wait for the offer to run its protracted course. In the case of Merrydown, I feel it is worth hanging around until the takeover goes through. I do not think a counter-bid will materialise, although the possibility cannot be completely dismissed, as accepting shareholders account for only 32.6 per cent of the capital.

More importantly, Merrydown has attracted a cash-only bid, whereas the Burtonwood shot included a share option. For a time, the share alternative pushed Burtonwood shares 20p or so above the cash bid, presenting an opportunity that I felt too good to miss. My decision to follow the bid programme means Merrydown, currently 166p, will remain in the portfolio until the 170p offer goes through. I suspect it will take some months before we actually see the cash: nearly £24,000 against a £5,000 outlay.

Another portfolio constituent has provided a more sobering experience. Even so, Printing.com, the high-tech printer, still looks a sound investment and I am prepared to stick with the shares. They suffered a hiccup when the company produced a mixed trading statement indicating profits would be towards the lower end of stock market expectations. Researcher Hardman & Co cut its profit forecast for the current year from £1.62m to £1.5m, but is sticking with next year's prediction of £2.45m. The shares, recruited at 30.5p, are about 52p.

Although Merrydown will be a portfolio constituent for some time, I am aware of the need for more recruits. It was decided early on that 16 would be an ideal number; once Merrydown goes, membership will sink to 13. Should Andy Nash and Nigel Freer, who masterminded the Merrydown revival, seek fresh pastures to conquer, I could be tempted by their next ventures, providing they are quoted.

Following successful business talent often provides rewards. Bob Holt, the man behind Mears, one of my most successful investments, has, after an indifferent run, generated interest in another portfolio member, Wyatt, the on-line risk consutlancy. Clearly Messrs Nash and Freer are worth watching.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
PROMOTED VIDEO
News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete tomorrow
News
Piers Morgan tells Scots they might not have to suffer living on the same island as him if they vote ‘No’ to Scottish Independence
peopleBroadcaster has a new role bringing 'the big stories that matter' to US
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Life and Style
Moves to regulate e-cigarettes and similar products as medicines come amid increasing evidence of their effectiveness
healthHuge anti-smoking campaign kicks off on Wednesday
Life and Style
fashionEveryone, apparently
Voices
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
A new Banksy entitled 'Art Buff' has appeared in Folkestone, Kent
art
Arts and Entertainment
Shia LaBeouf is one of Brad Pitt's favourite actors in the world ever, apparently
filmsAn 'eccentric' choice, certainly
Life and Style
An Internet security expert has warned that voice recognition technology needs to be more secure
techExperts warn hackers could control our homes or spend our money simply by speaking
Extras
indybest
News
peopleBenjamin Netanyahu trolled by group promoting two-state solution
Finacial products from our partners
Property search
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

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    Day In a Page

    Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

    Isis an hour away from Baghdad -

    and with no sign of Iraq army being able to make a successful counter-attack
    Turner Prize 2014 is frustratingly timid

    Turner Prize 2014 is frustratingly timid

    The exhibition nods to rich and potentially brilliant ideas, but steps back
    Last chance to see: Half the world’s animals have disappeared over the last 40 years

    Last chance to see...

    The Earth’s animal wildlife population has halved in 40 years
    So here's why teenagers are always grumpy - and it's not what you think

    Truth behind teens' grumpiness

    Early school hours mess with their biological clocks
    Why can no one stop hackers putting celebrities' private photos online?

    Hacked photos: the third wave

    Why can no one stop hackers putting celebrities' private photos online?
    Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

    Homegrown ballerina is on the rise

    Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
    Education, eduction, education? Our growing fascination with what really goes on in school

    Education, education, education

    TV documentaries filmed in classrooms are now a genre in their own right
    It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

    It’s perfectly reasonable to negotiate with villains like Isis

    So why don’t we do it and save some lives?
    This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

    Is a sub-2-hour race now within sight?

    Dennis Kimetto breaks marathon record
    We shall not be moved, say Stratford's single parents fighting eviction

    Inside the E15 'occupation'

    We shall not be moved, say Stratford single parents
    Air strikes alone will fail to stop Isis

    Air strikes alone will fail to stop Isis

    Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
    Witches: A history of misogyny

    Witches: A history of misogyny

    The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
    Shona Rhimes interview: Meet the most powerful woman in US television

    Meet the most powerful woman in US television

    Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
    'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

    Endangered communities photographed 'like Kate Moss'

    Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style