Greene King backs Wolves' Marston bid

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The Independent Online
WOLVERHAMPTON & DUDLEY took a big step towards winning the battle for control of Marston, Thompson & Evershed, the regional brewer, as it clinched a deal yesterday that removes a potential rival bidder from the field.

If its bid succeeds W&D, will immediately sell 170 of Marston's pubs to Greene King, the Suffolk brewer, for about pounds 80m. In return, Greene King has pledged not to table a rival offer for Marston unless a new bidder enters the fray.

The deal will also bolster W&D's balance sheet, allowing it to raise the cash part of its offer. Observers had worried that the bid was stretching W&D's balance sheet to dangerous levels.

The news knocked Marston shares, which dipped 8p to 287.5p. Greene King rose 2p to 517.5p. W&D shares rose 6p to 422.5p, taking the value of the group's cash and shares bid to 281p per Marston share.

"This is good news for everyone except Marston, and an increased bid of around 10 percent by Wolves would probably be acceptable to most investors," said Nigel Popham, an analyst at stockbrokers Teather and Greenwood.

But Marston immediately hit back at W&D, suggesting the sale would incur a capital gains tax charge and dilute the group's earnings. "This is a poor deal driven by a need for cash," a spokesman said.

Earlier this month shareholder pressure forced Marston to abandon a plan to sell 569 tenanted pubs in a securitisation deal with Nomura, the financial group. Aborting the deal is believed to have cost the company up to pounds 20m in underwriting and advisers' fees.

Ralph Findlay, W&D finance director, said Greene King had approached the company about selling the pubs after the initial bid was launched. He said the 170 pubs were outside the Granada and Tyne-Tees television areas where most W&D pubs are based. "Our focus is on running the pubs and brands in a geographical area where we have a strong presence," he said.

Under the deal, Greene King will buy 100 tenanted pubs and 70 managed pubs for about pounds 80m if W&D takes control of Marston. The pubs, which are scattered across the South of England, made operating profits of about pounds 8m on turnover of pounds 36m in the year to September.

"When Wolverhampton launched their bid we had a variety of options open to us, one of which was a counterbid," said Tim Bridge, Greene King chief executive. "This opportunity to buy made a lot of sense."