ALE May 1999 No. 294

The Vaux Saga

Continuing the story from ALE 293 of the attempted management buyout (MBO) of the Vaux Sunderland and Ward's Sheffield breweries, saving all 700 jobs, plus 350 tenanted pubs, led by Frank Nicholson. We've reached early February 1999...

Martin Grant, Chief Executive of the Swallow Group, and Neil Gossage, Finance Director, went behind the back of the Board of Directors and talked to leading shareholders about their concerns about the buyout. The pair seemingly never believed in it - that it represented "shareholder value". They were dismissed (apparently with a 500,000 payoff) and Peter Catesby became Chief Executive. Grant had been Chief Executive for seven months and before that ran Allied Domecq's Firkin theme chain (some might say into the ground). A committee of directors was appointed to deal with the sale.

On 22 March the Board rejected the buyout offer. The Chairman, Sir Paul Nicholson, then criticised the other directors, who seemed to think it's cheaper to simply close the brewery sites. He thinks they've underestimated the costs of closure and neglected the intangibles in a deal - the goodwill and jobs.

Anyway, Sir Paul Nicholson felt he had to resign - he was due to retire anyway later this year. His family had controlled the Vaux brewery in Sunderland for more than 120 years.

What remained of the Board then broke off negotiations with the buyout team and warned its breweries' staff of redundancies. The breakdown was apparently over a three-year supply deal. All 664 tenanted pubs are now for sale and the breweries will close by 2 July if no buyer is found. The Swallow Group plan to retain the 180 managed pubs.

Substantial Government aid is available for keeping the breweries going - rumoured to be at least 1M and perhaps 3-5M. The original MBO backers, Alchemy Partners and Bank of Scotland, are apparently still offering support.

The Bishop Auckland MP Derek Foster brought up the subject in a Commons debate and named Mercury Asset Management, the Bankers Trust and Hermes Pensions Management (the former Post Office pension fund) as the shareholders who'd scuppered a deal.

Mansfield Brewery (Mansfield, Notts) is apparently interested in the Ward's Sheaf Brewery in Sheffield plus 300 tenancies. The Sheaf Brewery is the last large-scale brewery in Sheffield, the Cannon brewery (Stones) having closed in 1998.

The former Whitbread Exchange Brewery site in the city centre, closed 8 years ago, is about to become a 131-bed, 4-storey budget hotel & meetings venue, developed by Oriel Leisure and Union Property.

As of 1st May Swallow has received bids for its tenanted pubs but not the breweries. The tenants have been invited to buy their pubs and there's also interest from pub/leisure groups.

Customer care?

CAMRA urged the Board to remember their customers when considering bids and using its influence through the CAMRA Investment Club urged other shareholders to call for an Extraordinary General Meeting of the Swallow Group.


Sources

Telegraph 23/3/99
Independent 24/3/99
Ceefax 8/4/99
Licensee & Morning Advertiser 18/2/99, 29/3/99, 3/5/99
Publican 5/4/99 & 3/5/99
CAMRA - various Press Releases


ALE May 1999 No. 294 : Next section
Cambridge & District CAMRA