Cumbrian brewer agrees offer from Wolves

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Consolidation in UK pubs and brewing moved forward on Wednesday as Jennings Brothers, the small Cumbrian company, confirmed it had agreed an offer from a larger rival and issued what is likely to be its last set of full-year figures.

Jennings, which started as a family company in the Lake District in 1828 and began brewing at its present site in Cockermouth in 1874, said it had agreed a 430p-a-share offer from Wolverhampton & Dudley Breweries.

The offer highlights a trend back towards the traditional model of breweries owning their own pubs. Over the past couple of years, Wolves, and Suffolk-based Greene King, have built up estates of more than 2,000 pubs each - the limit imposed by the now-defunct beer orders, which were designed to break up old monopolies.

Wolves is also rumoured to have designs on Belhaven, the Scottish brewer, and possibly Daniel Thwaites, the Ofex-listed brewery based in Blackburn, Lancashire. In January, it signalled it was on the hunt for more acquisitions after swallowing Cheshire’s Burtonwood brewery for £120m.

The latest approach, which values Jennings’ brewery and its 128 mostly-freehold pubs at £45.8m, was taken well by the City.

Merrill Lynch on Wednesday began coverage of Wolves with a price target of £12.50 - 20 per cent above the current share price. Analyst Adrian Bougourd said: “Although the shares have outperformed the UK market by 21 per cent in the last 12 months, we believe an undemanding valuation, potential upside to earnings and a positive newsflow pipeline should mean that the rerating is likely to continue.”

However, “real beer” enthusiasts, who have historically been strong supporters of both companies, have hit out at the deal. CAMRA - the Campain for Real Ale - is lobbying Jennings shareholders to reject the offer.

Mike Benner, of Camra said: “Despite W&DB’s assurances to keep the Cockermouth brewery open, I think the only way to guarantee the future of the brewery is to defend its independence as a vertically integrated company. It has performed very well in recent years, despite the nightmare of foot mouth disease four years ago. The strategy since then has made its pubs and beer brands very strong and successful.”

Jennings announced turnover of £18.2m for the year to February 26, up from £167.2m previously. Pre-tax profits rose from £2.8m to £3.4m and earnings per share increased from 19.1p to 22.9p.

However, the board passed the final dividend in anticipation of the Wolves offer and the total payout was 2.5p compared with 6.7p previously. Jennings shares rose 9p to 416p and Wolverhampton and Dudley shares fell 7p to £10.30.

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