Smaller Companies: Clark goes wholesale
Monday 21 June 1993
The cash is being used to take Clark into the fast-expanding field of drinks wholesaling, in which Boddington Group is pulling ahead of competitors only a couple of years after taking the plunge.
Clark's shareholders are due to meet on Thursday to sanction the acquisition of Freetraders from the company's management, which owns 70 per cent, and from Devenish, the West Country pubs group, which has a 30 per cent stake.
There is a profit-related earn-out kicker in the deal which could take the total purchase price to pounds 35m - equal to more than 70 per cent of Clark's stock market value of pounds 49m.
The City has already displayed its liking for the deal, with Clark's shares rising from 405p when the deal was announced on 9 June to 430p. The nine-for-four rights price is 320p.
Devenish has also done well out of the deal, booking a pounds 4m profit on a company it bought for pounds 8.3m in 1988 before selling a 70 per cent stake to management in 1991 for pounds 10.5m.
Freetraders, formed in 1976, comes with 200 staff, operating 55 vans out of six depots. The big draw for Clark, though, is the company's large client base in pubs, clubs and hotels.
The client base is heavily biased towards the South, although Freetraders is fairly well represented in the Midlands through depots in Birmingham and Bedford.
A prime factor behind the growth of drinks wholesaling companies has been the Government's Beer Orders, which forced big brewers to sever direct sales ties to more than 11,000 pubs.
Freetraders, and its competitors, have been able to sign up large exclusive supply deals with established pub groups and the large crop of pub companies formed out of large blocks of outlets sold by the big brewers.
The speed of Freetraders' expansion is highlighted by the growth in clients from 1,650 in September 1990 to 4,500 two years later, and to more than 5,600 today. Operating profits in the year to last September were pounds 2.3m, up from pounds 1.4m, and attained on sales ahead from pounds 31.2m to pounds 39.4m.
A large part of the increase in clients over the past nine months has come from the purchase last October of Francis of Guildford, which is expected to account for about 18 per cent of Freetraders' sales this year.
Acquisitions are key to the changes in the wholesaling sector. Looking at a bleak future of competing against large multiple wholesalers, many independents will be forced to sell. Clark therefore will hold the upper hand in purchase negotiations.
Shareholders in Clark would be well advised to ride along with the company's ambitious plans.
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
- 3 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 4 Mafia's wall of silence broken: Victim of Cosa Nostra's extortion rackets in its Corleone heartland co-operates with authorities for the first time ever
- 5 Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
King Salman: Just five days in, Saudi Arabia's new king has already overseen a beheading
Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
Mafia's wall of silence broken: Victim of Cosa Nostra's extortion rackets in its Corleone heartland co-operates with authorities for the first time ever
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...