Pub chain gets one in

Enterprise Inns is locked in takeover talks with Discovery Inns, according to an industry source. The deal could be worth more than pounds 50m, and would significantly boost the size of Enterprise, which has a stock market value of pounds 125m based on Friday's closing price of 265p.

The source said that Enterprise had signed an "exclusivity contract", blocking other potential bidders for Discovery, which abandoned plans to float last December due to volatile stock market conditions at the time.

Enterprise would not com-ment yesterday.

Discovery's flotation was aimed at giving an exit for Kleinwort Benson, the company's venture capital backers. The company was founded in 1992 as a vehicle to acquire 223 pubs from Whitbread in England and Wales, and has increased its estate through purchases from Allied Domecq and Marston, Thomson and Evershed.

The decision to pull Discovery's flotation raised some eyebrows in the City because of the insatiable appetite among investors for the new-style independent pub operators that have been created as a result of the forced mass sell-off of 11,000 pubs between 1989 and 1992.

Paul Smith, chairman of Discovery, wants to keep the company independent, but is understood to have received several tempting approaches from other pub groups since the float was pulled. A spokesman for Discovery had no comment.

Discovery made pounds 3m profit before tax in the year to last September, a increase of 50 per cent on its 1994/95 results. One analyst suggested that Discovery could be on course to double last year's result by September 1998.

The company owns The Old Bull at Inkberrow, the model for the fictional Bull in The Archers. In general, its pub estate is positioned half-way between the managed themed chains like Tom Cobleigh and the likes of the tenanted estates run by Enterprise and Century Inns.

Share prices of the independent pub groups have soared in the last couple of years, and some of the companies are trading on fancy ratios of 30 times prospective earnings.

Enterprise Inns, which floated in November 1995, doubled the size of its pub estate last year through the pounds 51.3m purchase of John Labatt (UK), the pubs arm of Interbrew, the private Belgian company that brews Stella Artois. The company now has more than 900 pubs and recently announced a underlying surge in annual taxable profits from pounds 5.66m to pounds 8.5m.

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