Outlook: Regional brewers

EVERYONE ELSE is busy consolidating, so why not the regional brewers

too? That's what Wolverhampton & Dudley thinks anyway. The trouble is

that its Midlands rival, Marston, Thompson & Evershed, doesn't want to

play ball. This pounds 260m takeover battle moved up a gear yesterday with news

that Marston is promising shareholders an increase in the payback from

60p to 101p a share should they reject the bid.

Marston is able to do this because it is securitising its tenanted estate,

a disposal which will realise some pounds 137.3m. David Thompson of Wolverhampton

& Dudley has in turn made his offer conditional on shareholders rejecting

this proposal, since a part of the rationale for the bid is gaining access

to Marston's tenanted estate. In other words, he's threatening to withdraw

his bid if shareholders back Marston's securitisation plan.

Whether he will go through with this threat remains to be seen; the

condition can be waived. But is this a risk shareholders want to take?

Next Wednesday they assemble in Burton upon Trent to vote on the issue,

so it's make your mind up time.

The argument is a finely balanced one. Marston hints obscurely that there

might be other bidders in the wings - Greene King for instance - for whom

a cash-rich brewer stripped of its tenanted estate could be attractive.

If there is to be a wide ranging consolidation among regional brewers,

it might pay to see who else comes out of the woodwork, the argument goes.

It would plainly make sense from everyone's point of view to delay the

securitisation vote so that the bid can be fought on its merits and to

allow for the possibility of higher offers, either from Wolverhampton

or others. Unfortunately, Marston claims, this cannot be done since to

abandon or lengthen the underwriting of the securitisation would be exceptionally

costly and there would be no guarantee of getting such favourable terms

again.

Even so, Marston may have done its shareholders no service by making

a stand on this issue, for if the company loses, it will be as if the

management's defence has already been rejected. Wolverhampton & Dudley

will, as a consequence, be that much more reluctant to raise its bid.

So it's a tough call. In the end, however, shareholders would be wise

to reject their management's proposals. There is likely to be more value

realised by allowing the bid process to run its course than by obstructing

it at this early stage.