Wolverhampton& Dudley Breweries PLC
23 July 2001
This announcement is not for release or distribution in or into the
United States, Canada, Australia or Japan
For immediate release 23 July 2001
THE WOLVERHAMPTON & DUDLEY BREWERIES, PLC ('W&DB')
In its latest defence document to be posted today, W&DB sets out why
shareholders should reject Pubmaster's poor offer and keep their shares in a
valuable business that is performing strongly.
The document includes new information which demonstrates that W&DB is
progressing with its programme announced in April 2001 to deliver shareholder
value, with significant improvements in operating performance since March
Profit and dividend forecast
W&DB is pleased to announce today that it is forecasting profit before tax(1)
of £76 million for the 52 weeks to 29 September 2001, up 16.9% on the previous
year, with earnings per share1 forecast to rise by 10.7% to 58.0p.
The Board also forecasts an increase in total net dividends per share for the
year of 10.3% to 26.5p.
Following the announcement of its strategy in April 2001, W&DB has received
indicative offers totalling approximately £121 million for 112 of the 170 pubs
and sites that it intends to sell. This represents a premium of 11% over book
value as at 30 June 2001(2). W&DB expects that total proceeds from the
disposal programme will amount to approximately £135 million.
The document also contains a valuation by Christie & Co of the pub estate to
Return of capital
W&DB announced in April 2001 that it intends to return up to £200 million
(equivalent to 212p per share) in cash to shareholders over the next two
years. W&DB intends to undertake the first tranche of the capital return
programme, subject to shareholder approval and achieving £65 million of
disposals, by way of a tender offer to buy back £100 million of W&DB Ordinary
Shares (equivalent to approximately 22% of its current market capitalisation)
(3) before the end of this calendar year. This reflects the Board's confidence
in W&DB's ability to meet its targets.
The tender price will be not less than the average middle market price over
the five business days ending on the fifth business day before: (i) the last
date for acceptance of Pubmaster's Offer; or, if earlier, (ii) 13 August 2001.
The balance of the return of capital is expected to be carried out by April
2003, subject to the Company achieving its plans. In determining the level and
timing of future capital returns, the Board intends to maintain interest cover
of at least 2.75x and total borrowings of less than 4x EBITDA.
Barclays Capital is committed fully to underwrite facilities to enable W&DB to
undertake this return of capital.
The Board anticipates that the return of capital will significantly enhance W&
DB's earnings per share(4).
Pubmaster's poor offer
The defence document sets out why Pubmaster's offer of 480p per share offers
poor value to shareholders and fundamentally undervalues W&DB. The offer:
* is purportedly justified by reference to W&DB's share price nearly a
* ignores the significant improvement in W&DB's trading performance
since March 2000 as evidenced by strong current trading, improved
margins and a significant reduction in debt;
* ignores the re-rating of the brewing sector which, based on
comparable brewing companies' share prices, has increased on average
by 37% since 11 August 2000(5);
* represents an exit multiple of just 8.4x pro forma earnings per
share for the 12 months to 31 March 2001(6); an 18% discount to the
historic trading price earnings multiple for W&DB's closest
comparator, Greene King, of 10.3x(7);
* represents an exit multiple of just 8.3x forecast earnings per share
(8) for the 52 weeks to 29 September 2001; and
* would result in a 14% reduction in income for shareholders(9).
In contrast, the Board of W&DB firmly believes that the opportunity to
participate in a growing, focused business with strong prospects for the
future, together with a cash return of up to 212p per share, offers
shareholders significantly greater value.
David Thompson, Chairman of W&DB, said: 'Our profit forecast today
demonstrates the good underlying trading improvements we have achieved since
March last year despite the distractions of being in an offer period for
nearly a year. Current trading is good.
We have a clear and proven strategy in place to exploit the core strengths of
the business whilst returning up to £200 million in cash to shareholders.
Pubmaster's offer represents poor value for W&DB's strong cash generation,
valuable assets and improved trading outlook and completely fails to take
account of the sector re-rating over the last year. The Board of W&DB
strongly urges shareholders to continue to reject the offer.'
The Wolverhampton & Dudley Breweries, PLC
David Thompson Telephone: 020 7796 4133 on 23 July;
01902 329508 thereafter
Ralph Findlay Telephone: 020 7796 4133 on 23 July;
01902 329530 thereafter
N M Rothschild & Sons Telephone: 020 7280 5000
Hudson Sandler Telephone: 020 7796 4133
N M Rothschild & Sons Limited, which is regulated in the UK by The Securities
and Futures Authority Limited, is acting exclusively for W&DB and no one else
in connection with the offer and will not be responsible to anyone other than
W&DB for providing the protections afforded to customers of N M Rothschild &
Sons Limited or for providing advice in relation to the offer.
The Directors of W&DB accept responsibility for the information contained in
this announcement. To the best of the knowledge and belief of the Directors
of W&DB (who have taken all reasonable care to ensure that such is the case)
the information contained in this announcement is in accordance with the facts
and does not omit anything likely to affect the import of such information.
(1) Before exceptional items and goodwill amortisation and impairment.
(2) Based on the audited book value at 30 September 2000, adjusted for
capital expenditure and depreciation.
(3) Based on W&DB's closing share price on 20 July 2001, being the last
practicable date prior to this announcement.
(4) This statement should not be interpreted to mean that W&DB's future
earnings per share will necessarily be greater than its historic published
earnings per share. This statement does not constitute a profit forecast.
(5) The comparable companies used to calculate the average share price
increase are Greene King, Fuller Smith & Turner and Youngs & Co's Brewery.
The increase has been calculated based on the average of the closing share
prices of these companies on 20 July 2001, being the last practicable date
prior to this announcement, relative to their closing share prices on 11
August 2000, as sourced from Datastream.
(6) Based on pro forma earnings per share before exceptional items and
goodwill amortisation and impairment for the 12 months ended 31 March 2001
of 57p, comprising 34.3p for the 26 weeks ended 30 September 2000 and
22.7p for the 26 weeks ended 31 March 2001.
(7) Based on the closing share price on 20 July 2001, being the last
practicable date prior to this announcement, and the most recent reported
earnings per share before exceptional items and goodwill amortisation and
impairment of 65p, being for the 52 weeks ended 28 April 2001.
(8) Before exceptional items and goodwill amortisation and impairment.
(9) Based on a comparison of the forecast gross dividend yield of a W&DB
Ordinary Share of 6.1% with the Government Securities Index average gross
redemption yield for medium coupon UK gilts with maturities of 5 to 10
years of 5.27%, as published in the Financial Times on 20 July 2001, being
the last practicable date prior to this announcement.