The deal will give Clark, which moved into the cider market a year ago, a 45-per-cent share of the market compared with the 46 per cent controlled by Bulmer. Matthew Clark and Taunton combined will own several leading cider brands, including Olde English, Dry Blackthorn, Diamond White, and Autumn Gold.
Clark's move had been expected since Taunton announced a fortnight ago that it was in takeover talks, but investors were dismayed yesterday over the terms of the deal which will virtually double the number of the company's shares in issue. "The stock market is suffering from severe indigestion of Matthew Clark paper," said one drinks analyst yesterday. The company has grown rapidly through making rights issues to make acquisitions, since Peter Aikens became chief executive five years ago.
Taunton's shareholders are being offered 383 shares in Clark for every 1,000 they own. This will swell the number of Clark's shares in issue by 98 per cent to 89 million, compared to 9.6 million when Mr Aikens took the helm.
Despite the indigestion, which saw Clark's share price fall 33p to 587p yesterday, analysts did not dispute the logic of the deal, either on a financial or industrial basis. The cider market is growing, and competition is intensifying, with the big brewers displaying a keen interest in the sector to help counter the continual decline in beer sales.
Whitbread, the country's fourth-biggest brewer, recently struck a marketing and distribution agreement with Merrydown, the Sussex-based cider producer. And additional competition comes from Bass which has just launched Hooper's Hootch alcoholic lemonade, viewed by industry observers as a threat to cider brands.
With those competitive threats in mind, Mr Aikens believes the deal will escape scrutiny by the Monopolies and Mergers Commission. And while the 25-per-cent market share monopoly benchmark will be breached, he stressed that cider's share of the beer market was just 7 per cent.
Clark first tried to move into cider four years ago, but was out-bid by Taunton's management which bought the company for pounds 72.5m from its joint owners - Bass and Courage. The same happened with Gaymer, which was bought by management from Allied Domecq and subsequently acquired by Clark for pounds 105m.
"Unlike past deals this purchase is not driven by potential cost savings, but by the major synergies that merging the two businesses can bring," Mr Aikens said.
Head-to-head in the cider market
Bulmer - Main brands are Strongbow, Woodpecker, Scrumpy Jack, Strongbow Super and Max. These brands alone account for 21 per cent of all ciders sold in off-licence premises, and 48 per cent of ciders sold in on-licence premises. Bulmer has 46 per cent of the total cider market.
Matthew Clark - Main brands, including those owned by Taunton, are Dry Blackthorn, Olde English, Autumn Gold, Diamond White, Red Rock, and `K'. These brands account for 37 per cent of the on-trade market, and 16 per cent of the off-trade market. Matthew Clark and Taunton combined will have 45 per cent of the total cider market.Reuse content