Investors challenge Marston pub deal

SOME OF the largest institutional shareholders in regional brewer Marston, Thompson & Evershed are planning to vote against the company's proposed securitisation of its tenanted pub estate at a crunch meeting tomorrow.

The shareholders aim to enable the pounds 262m bid from Wolverhampton & Dudley to be considered at greater length.

The vote on securitisation is seen as a test of confidence in Marstons' management as Wolves has made its 282p per share offer conditional on the pounds 137m securitisation being rejected.

One major institutional shareholder said it has "made it known" to Marstons that it wants the meeting adjourned. "It is incumbent on the board to adjourn the meeting in order to properly discuss the offer," the shareholder said.

Shareholders are unhappy that Marstons appears to have agreed to some heavy upfront costs in the securitisation that would be written off if the meeting is pulled.

Marstons is said to have incurred costs of pounds 6m so far in the securitisation, which is being arranged through Nomura, the Japanese investment bank. However, total costs including compliance, legal advice and hedging costs are thought to be around pounds 18m.

Marstons said yesterday that its emergency meeting to approve the securitisation was expected to go ahead. It has said before that it would be too expensive to defer the securitisation.

Some of Marstons' institutional shareholders believe the Wolves bid is "too low." Marstons shares closed 3p down at 291p yesterday. Wolverhampton & Dudley shares were a penny lower at 423.5p.

Marstons is offering to return 110p per share to shareholders via a share buy-back if they approve the securitisation. The company then wants to use the remaining proceeds to invest in its managed pubs estate, which includes the Pitcher & Piano group of bars.

Greene King, the Abbot ale brewer, is waiting in the wings as a potential "white knight" bidder for Marstons. However, it is understood to be waiting until the outcome of tomorrow's meeting is known before showing its hand.

The company is thought to be interested in playing a part in the consolidation of the brewing and pub sector. The City might view such a move favourably after its successful integration of the Magic Pub Company in 1996.