UK: Marston's, the former Wolverhampton & Dudley Breweries, buys its rival, Eldridge Pope

Regional brewer and pub group Marston's - the former Wolverhampton & Dudley Breweries – took over smaller rival Eldridge Pope for pounds 155.1 million, The Birmingham Post said on January 26.

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The deal will enable Wolverhampton-based Marston's to boost its presence in southern England - and in more profitable managed pubs.

The takeover is the latest in a fast-consolidating industry, as higher regulatory, labour and energy costs weigh on smaller pub groups and lead bigger operators to seek economies of scale.

"It's easier if you're bigger to cope with some of the costs in the sector," said chief executive Ralph Findlay. He added the firm would look to make more acquisitions in England and Wales but would still aim to return pounds 100 million to shareholders and maintain its new-build program.

However, analysts were divided on the attractiveness of the deal, as well as the price paid.

Marston's, which changed its name this month from Wolverhampton & Dudley Breweries to reflect its expansion in pubs and beyond central England, said it was paying 8.6 times earnings before interest, tax, depreciation and amortization (EBITDA) per unit, adjusted for the planned sale of 18 of the 153 outlets being bought.

Numis Securities analysts said this was "attractive in current market conditions," with others saying rivals Punch Taverns and Greene King paid over ten times EBITDA per pub in their recent acquisitions of Mill House Inns and Hardy's & Hansons respectively.

But Panmure Gordon said the unadjusted price was high. "With Eldridge Pope management leaving, Marston's will have just four months to develop smoking ban solutions for these sites," the broker added.

Smoking is already prohibited in Scottish pubs and is set to be banned in Wales and Northern Ireland from April 2 and in England from July 1.

Marston's, which runs the Pitcher & Piano and Taverners Carvery chains, said it was buying Eldridge Pope from entrepreneur Michael Cannon and that the deal would boost its earnings in the first full year following completion.

Eldridge Pope was an old family-controlled brewer which first closed its brewery and then sold its pubs to Mr. Cannon for pounds 42.3 million in 2004 after several years of struggling to compete with a new breed of big pub companies.

Marston's said it paid for the deal in cash and assumed pounds 17.1 million of debt, and had replaced its existing pounds 275 million banking loan with pounds 400 million of new facilities.

The firm also said its likefor- like sales were up seven per cent in the 16 weeks to January 20 in its managed pub division - now known as Marston's Inns & Taverns - in line with its expectations and boosted by strong food sales.

Strong growth in food sales contributed to the "good" performance, which came after sales rose 9.1 per cent in the eight weeks to November 25. In the tenanted and leased pub division, trading was ahead of last year.

Marston's Beer Company, which brews Pedigree and Banks's, experienced a slight dip in volumes. But it grew its share of premium ale sales in a weak beer market.

Mr. Cannon has a strong record of deals in the UK pub industry, following investments in JA Devenish, the Magic Pub Company and Morrells of Oxford. In the United States, he revitalized the hamburger chain Fuddruckers.

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