Barrie Hoar, chairman of Hoskins, said counsel advised it to settle. Hoskins will honour the settlement in five monthly instalments. It will also pay a large part of the legal costs.
The complicated option was based on terms whereby Mercia could compel Hoskins to pay pounds 1 per Netherton share. To do that, Mercia had to obtain enough Netherton shares to enable Hoskins to buy 90 per cent of the Netherton equity.
Hoskins is preparing to send a circular, detailing the settlement, to its shareholders.
It is understood that Netherton's shareholders involved in the option exercise will receive at least 80p in the pound.
Hoskins yesterday reported a rise in pre-tax profits for the year to 31 March from pounds 57,000 to pounds 83,000, largely reflecting a sharp cut in net interest charges from pounds 173,000 to pounds 144,000.
Hoskins is eliminating its pounds 1.2m of debts through the sale of nine pubs to Wolverhampton & Dudley Breweries for pounds 2.45m cash.
Mr Hoar said of the remaining disposal proceeds, some would be placed on deposit and some used for unspecified developments.
He denied, however, a suggestion that the pub sale had been forced by the Netherton settlement. 'There was no pressure from the banks . . . we had facilities,' he said. A contingency liability of pounds 268,000 was shown in last year's accounts, but no funds had been set aside.
On expansion, he said: 'We have got some plans, not necessarily within the industry but compatible.'
Plans to buy 18 pubs from Bass went sour in the 1991/2 year and cost Hoskins pounds 33,000 in abortive charges. That was roughly half of total extraordinary items, which included more provisons for closing the catering division.
Andrew Thomas, managing director of Greenalls since 1980, has been appointed chairman and chief executive on the retirement of Christopher Hatton. Peter Greenall becomes managing director.