C&C, the Bulmers/Magners cider maker that is mulling a near €1 billion bid for the Spirit Pub Company in Britain, is rumoured to be considering combining with another bidder to mount an all-cash offer.
It emerged last Thursday that C&C wanted to buy the listed Spirit group of 1,200 pubs and that it had already been rebuffed over an initial estimated £760 million (€962 million) approach for a prospective deal thought to be about one-third cash. The rest of the proposed consideration was to be in C&C shares.
C&C’s rival bidder for Spirit, the Greene King chain, is close to an agreement with Spirit’s board to accept a £723 million (€916 million) all-share bid.
C&C's advisers are understood to have focused on the idea that Spirit could be swayed with a compelling cash offer, a strategy that worked for the Brazilian Safra-Cutrale bid that last week derailed the proposed all-share merger between banana companies Chiquita and Fyffes.
The company, which presents its interim results today, was unavailable for comment last night.
C&C’s share price slumped by 10 per cent last Friday after news emerged of its interest in Spirit, which would make an offer with a large shares component more expensive for the Irish group to complete on paper.
The company is now reported to be looking for a partner to mount an all-cash bid to solve this issue. It has even been suggested by one analyst in the UK that C&C should team up with Greene King to swallow Spirit together.
"The interesting development would be for all three businesses to combine. The result would be a leading pub company and brewer," said Canaccord Genuity analyst Nigel Parson.
C&C’s shareholders and analysts are sceptical about the merits of C&C entering the pubs business, which would be a departure from the group’s strategy. Critics of the bid for Spirit say that C&C has no experience running pubs.
The cider maker is arguing that the 1,200 pubs – including chains such as Wacky Warehouse and Fayre and Square – would give it a valuable distribution network for its drinks products, as well as exposure in the greater London area that is spiritual home of the premium Magners brand.
Some market observers suggested that if C&C were to combine with Greene King to buy Spirit, it would solve the problem of a lack of pub management experience, as Greene King operates about 1,000 pubs. The Irish company, meanwhile, has a more compelling list of drinks products than Greene King, whose best known brand is Old Speckled Hen ale.
Investec yesterday predicted that C&C would today announce interim revenues of about €372 million, up about 10 per cent.
The broker also said the company needed to provide a “roadmap” for its struggling US operation, the Vermont Hard Cider Company. It paid €305 million for it two years ago, but it has so far failed to match expectations.
