Wolverhampton & Dudley Breweries on Monday said it was in takeover talks with Jennings, the Cumbria-based pub operator and brewer whose lead brand is Cumberland Ale.
The Midlands-based pub operator said it planned to make a cash offer of 430p per share for Jennings, valuing it at ?46m ($86m). W&D will also take on ?21m in debt, giving the proposed deal an enterprise value of ?67m.
The proposed acquisition would be the third in less than a year by the owner of the Marston?s Pedigree beer brand, which has the third-largest pub estate in the UK after Enterprise Inns and Punch Taverns.
The price represents a premium of 32 per cent to the closing middle market price of 325p on April 8, the last business day before Monday?s announcement.
Jennings operates 128 leased and tenanted pubs in the north of England with 55 in Cumbria, 31 elsewhere in the north-west and 42 in parts of the north-east and Yorkshire.
Ralph Findlay, chief executive, said Jennings was a good fit culturally and geographically. He remained interested in additional acquisitions, but said: ?We still have work to do in making sure we get this business.?
The pub sector is consolidating as scale becomes increasingly desirable in the face of higher costs, a maturing market and regulatory pressure, such as the proposed smoking ban.
Greg Johnson of Shore Capital said the price was ?pretty full?, but given the potential cost savings the deal looked ?sensible?. ?It fits in well with the W&D model and is a pretty high quality estate. Jennings is slightly further north than Burtonwood, and it could take out overheads by using the same management team.?
He added that with interest cover of 3 times, W&D was in a strong financial position to make further acquisitions.
W&D in January completed the ?120m acquisition of Burtonwood, the brewer based in the north-west of England, which increased the size of its estate to more than 2,000 pubs. The company announced last summer it was acquiring Wizard Inns, a group of 63 pubs in southern England, for ?90m from Terra Firma, the investment vehicle of Guy Hands.
Jennings produces brands at its brewer located at Cockermouth in Cumbria including Cumberland Ale, which is distributed nationally.
Shares in W&D were up 8p at ?11.38 by lunch time.
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