New Pubmistress offer for W&D rejected

W&D Breweries has rejected Pubmistress’s increased offer of 513p per share saying it still fails to recognise the brewer’s fundamental strengths.

The board of Wolverhampton & Dudley Breweries (W&D) has rejected Pubmistress' revised offer of 513p per W&D ordinary share. The new bid values W&D at around £485m, or nearly £1bn if including its £512m of debt.

W&D strongly believes the offer, which represents a seven per cent increase over the initial offer, “significantly undervalues the group”. The board of W&D, which is being advised by Rothschild, has recommended shareholders to continue to reject the offer and not to sign any documents which Pubmistress or its advisers send them, nor to sell their shares in the market.

In an announcement following the increased offer, W&D stated that Pubmistress continued to miss the point highlighting the reasons why its offer was not acceptable. For example, it believes that the offer ignores the re-rating of the brewing sector, which, based on comparable brewing companies' share prices has increased by an average of 38 per cent since 11 August 2000 (the date at which Pubmistress compares its offer to W&D's share price).

It also states that: “Pubmistress repeatedly wrongly asserts that following the return of up to £200m to shareholders W&D would be 'over-leveraged'. In fact, W&D is a cash generative business which will continue to be soundly financed after this return of capital.” The W&D board says it believes that the combination of a cash return of up to £200m (equivalent to 212p per share) and the opportunity for shareholders to retain their investment in a growing, focused business is worth much more than Pubmistress's offer.

The battle for Britain’s biggest regional brewer started last August when leisure entrepreneur Robert Breare, backed by private equity group Botts & Co, approached the company with an indicative bid of 500p a share, which he later said could go as high as 550p.

Last October W&D effectively put itself up for sale and in February Pubmaster, which is 40 per cent owned by German Bank WestLB, emerged as new bidder. In May the UK takeover panel ruled that any bidder must either “put up or shut up” by June 1. Two days before the deadline Pubmaster made an attempt for an agreed bid at 491p, which was rejected. Then, with barely one hour to go before the June 1 deadline, it turned hostile with a bid of 480p. On June 14 Pubmaster issued its formal offer document, which started the 60-day takeover clock ticking. On July 30, day 46 of the bid timetable, Pubmaster increased its offer to 513p.

Commenting on the increased offer chairman David Thompson said: “This penny-pinching offer comprehensively ignores the re-rating of the sector and the significantly improved performance of W&D since the current offer period began almost a year ago. Our planned cash return of up to 212p per share, plus the retention of shares in an asset rich, soundly financed, focused and growing company, is worth considerably more than Pubmaster's offer. The increased offer fundamentally undervalues W&D, and the board therefore continues to advise shareholders to reject it.”