Merrydown in takeover talks

Merrydown, the beleaguered cider and alcopops maker, yesterday announced it was in takeover talks after plunging into the red. Andrew Yates finds the group is unlikely to retain its independence.

Merrydown is believed to be holding takeover talks with an international drinks group. However a bidding war could emerge with more rivals entering the fray, according to industry sources.

Pernod Ricard, which has close ties with Merrydown, having recently reached an agreement to distribute its controversial alcopop Two Dogs, is understood to be considering launching a bid.

Brewing giants Scottish & Newcastle and Whitbread, and cider rivals Matthew Clark and HP Bulmer could also be interested in making an approach but are not currently in talks with Merrydown. News of the talks sent the shares up 15p to 65.5p.

The announcement comes as Merrydown revealed it had lost pounds 944,000 for the six months to September, compared to a profit of pounds 673,000 last year.

Merrydown also revealed that Richard Purdey is to stand down as chairman after 32 years in the wake of growing criticism in the City of Merrydown's poor share price and operating performance. He was paid pounds 95,000 last year and is on a two-year rolling contract, so he is entitled to a pay-off of around pounds 190,000.

Matthew Jordan, drinks analyst at ABN Amro Hoare Govett, said: "This looks like Merrydown trying to sell themselves. The group needs to be snapped up by someone. If it remains independent it probably wouldn't last very long."

Mr Purdey said: "We expect to be in a position to decide whether a final bid has materialised well before Christmas."

Sales of Merrydown's Two Dogs have been rocked by the public outcry over alcopops and the decision by major retailers to stop stocking the brand.

Mr Purdey said: "Two Dogs sales have collapsed. The market was flooded by more than 90 new products and the effect has been cataclysmic."

Merrydown has also been hit by a rise in duty on strong ciders, which has lead to a price war.

Separately, Eldridge Pope announced a 23.6 per cent rise in pre-tax profits to pounds 5.4m, and a shake up in its share structure aimed at enfranchising its "A" shares. Old English Pub group also announced the acquisition of seven coaching inns for pounds 5.1m.