Marston turns tables with pounds 330m Wolves bid

THE BID BATTLE for Marston Thompson & Evershed took an unprecedented twist yesterday when the regional brewer turned on Wolverhampton & Dudley, its hostile suitor, by launching a pounds 330m counter-bid.

Marston's move is believed to be the first time that a UK company has attempted the so-called "Pac-Man defence", where a firm on the receiving end of an unwanted bid attempts to swallow its predator.

Marston is offering two of its shares and 246p in cash for each Wolverhampton share. At the same time, it proposes to pay its own shareholders a special dividend of 123p per share. The offer counters Wolverhampton's cash-and- shares bid for Marston, which was launched at the end of November.

However, Wolverhampton immediately rejected the bid. David Miller, the chairman, said: "Marstons clearly have no defence to our logical proposal for industry consolidation and have therefore chosen to embark on an expensive and flawed counter-attack aimed at distracting their own shareholders from the merits of our bid."

Marston, best known for itsPedigree bitter and its Pitcher & Piano pub chain, said it would fund the bid by selling 1,150 tenanted pubs to raise about pounds 250m.

It will close Wolverhampton's breweries in Wolverhampton and Hartlepool, shifting some production to its own brewery in Burton-upon-Trent. At the same time Marston has negotiated a deal with Bass, the brewing giant, to take over the production of Banks's, Wolverhampton's best-selling bitter.

Marston said the combined moves, which would lead to the loss of 340 jobs, would address the problems of overcapacity in the regional brewing industry and yield annual cost savings of pounds 24m.

Nick Letchet, the chief executive, said: "We believe there is a compelling commercial logic to this offer while more cash will be returned to the combined shareholder group." Under the terms of the deal, Wolverhampton shareholders will hold 55 per cent of the share capital of the enlarged group with Marston shareholders owning the remaining 45 per cent.

Amid frantic trading, Wolverhampton shares yesterday jumped 72.5p to 510p, while Marston's shares were up 4p at 302.5p. At yesterday's closing prices the respective bids valued each Wolverhampton share at 851p and each Marston share at 302p, but brokers pointed out that these values were artificially inflated.

Marston's unprecedented move caused confusion in the City. It is understood the Stock Exchange initially refused to release the announcement, believing that Marston's and Wolverhampton's names had been swapped over by accident on the announcement.

Institutional investors, many of whom own shares in both companies, gave Marston's move a cautious welcome. "We are not unhappy with Marston's move," one said. "Of course we would have preferred an agreed deal, but they have been trying to do that for two and a half years."

Nigel Popham, an analyst at Teather & Greenwood, said: "Obviously Wolves is not going to take this lying down. But they will now have to offer a lot more - probably around 380p a share."