Morland put out a statement saying it had begun discussions with Greene King which may or may not lead to a recommended offer of 430p, in the shape of a mixture of cash and shares.
Morland, which brews Old Speckled Hen and Ruddles bitters, disclosed the talks as it revealed a sharp fall in pre-tax profits from pounds 8.2m to pounds 5.1m - well below the City's expectations. The fall was due to flat sales and a string of one-off costs. Its statement said: "The board is pursuing these discussions because it believes that shareholders would wish to have the opportunity to participate in the consolidation which is taking place in the pubs and brewing sector."
The talks highlight the decline in Morland's fortunes since 1992, when its business was robust enough to fight off a hostile takeover bid from Greene King. Like most of its brewing rivals it has been hit by the recent decline in popularity of traditional cask ales and a slow Christmas season.
Amid speculation that other brewers might join the bidding, shares in Morland jumped 13.4 per cent to 422.5p. Observers also speculated about cost savings flowing from the deal, pushing Greene King up 1.1 per cent to 645p.
Fullers' profits, page 22