Outlook: Sunderland absentees rock the boat

RARELY has the usually sleepy world of regional brewing been so filled with the sound of gun shot. With the dust only just beginning to settle on the vitriolic two-way bid battle between Wolverhampton & Dudley and Marston, Thompson & Evershed, we now have a humdinger of a row at the Sunderland brewer, Vaux Group, which without ongoing chairman, chief executive or finance director, is now left rudderless, defenceless and wide open to a breakup bid.

Underlying this sudden burst of activity is a belated recognition of value wallowing in these traditional backwaters of British business, and an increased determination among shareholders to do something about realising it.

It was apparently without a trace of irony that Sir Paul Nicholson, the outgoing chairman, told analysts at his last results briefing that he hoped his successor would be as focused on shareholder value as he had been for the past 27 years. Shareholders, which include the enfant terrible of fund management, Phillips & Drew, would be forgiven for hoping otherwise, for Vaux shares have underperformed the rest of the stock market by a half during that period. Even Sir Paul had begun to feel the winds of change, however, and reluctantly he had agreed to a partial breakup of the group through the sale of its two breweries and some pubs. This was a plan that threatened to severe his family's connection with brewing, which goes back generations, so it must have been a relief when his brother, Frank, popped up as the favoured bidder for these interests and the board granted him exclusive negotiating rights.

Unfortunately the new chief executive, Martin Grant, and his finance director, Neil Gossage, didn't agree. They think that to close the breweries, which incidentally would have made Sir Paul's name mud in Sunderland, sell off the surplus assets and sign a new discounted beer supply deal with a national brewer, would yield more value. What's more they went behind the backs of the rest of the board in expressing their misgivings and outlining their alternative to major shareholders.

Their sackings raise two issues. First, is it ever justified for a chief executive to break ranks and ask shareholders to vote against the board's favoured strategy? Plainly it is when the board is doing something which is not regarded as in the best interests of investors in general. So the second question is whether the sale of these assets to the chairman's brother, given the alternatives, amounts to a validation of Mr Grant's disloyalty.

In usual circumstances, these questions would demand a thorough airing. As it is, the company has left itself so exposed to a hostile breakup bid, that we may not need to know the answers. The price being paid by Ladbroke for Stakis is leading to a general reappraisal of the value of these hotel and pub businesses, and it may well be that analysts are right in pencilling in a breakup value for Vaux of 350p a share and upwards.

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