Slug and Lettuce pubs chain says talks could bring takeover

Click to follow
The Independent Online

Shares in Slug & Lettuce, the branded pubs company, yesterday leapt 24 per cent after the group said it was in talks that could lead to a takeover offer.

Shares in Slug & Lettuce, the branded pubs company, yesterday leapt 24 per cent after the group said it was in talks that could lead to a takeover offer.

The shares closed up a record 32p at 165.5p, having fallen nearly 9 per cent so far this year. The company would not give details of its potential suitor and emphasised that discussions were "at a very early stage".

Analysts welcomed the news that S&L, which owns a total of 32 outlets across the UK, had attracted the attention of a third party. Steven Liechti, an analyst at Merrill Lynch, said the current management was working hard to "sort out a lot of legacies of the past". But he added that the company is "too small and has too large a chunk of debt" to thrive alone.

In January, the group posted half-year profits up 22 per cent at £971,000. Total turnover for the six months to 28 November was up 14.5 per cent at £13.9m, with like for like sales up 4.6 per cent.

The results showed a turnaround in the performance of S&L's northern bars, which had previously been lossmaking and which led the company to issue a profits warning in 1999.

Martin Hawkins, an analyst at Greig Middleton & Co, said S&L "ought to be worth over 200p a share". But he added: "With ratings in the sector as they are, I suspect that the idea price is closer to between 170p and 180p."

Possible buyers could include the large pub groups such as Whitbread, Scottish & Newcastle or Hugh Osmond's Punch Taverns. But analysts said the most likely contenders were smaller companies such as Regent Inns, Luminar Leisure or Po Na Na, the bar operator which is chaired by Gary Charles Pettet, S&L's former chief executive.

Both Mr Pettet and Tim Andrews, the group's former finance director, left S&L last year. The company is now fronted by Sheila McKenzie, managing director, and David Williams, chairman.

Analysts said Slug & Lettuce is an attractive takeover target after it turned round the northern outlets. Sales from the company's pubs open longer than a year rose 4.6 per cent in the six months to November.

Slug and Lettuce said it will make a further announcement in due course.

Comments