Thursday, 29 March 2012

Arrol - the end of independence

Financial history. Almost as fascinating as 1850's Porter grists. I never thought I'd write so much about it. I'm still not sure I grasp even the basic principles.

Like, what does it mean when a company reduces its share capital? Presumably it means that he value of the company is being downgraded. This is what Arrol did in 1909:

"In 1901 more tied houses were acquired with the purchase of the brewery business of Dove & Newsome Baxter Ltd., of Newcastle and Thomton-le-Moore (North Yorkshire). This latter firm was an amalgamation of Dove, McEwan & Co. of the Blandford Brewery, Newcastle, and Newsome Baxter & Co. of Thornton-le-Moor, near Northallerton. Brewing continued at Thornton-le-Moor until 1909, when this brewery was closed. The capital of the firm was reduced at the same time from £400,000 to £305,000 by cancelling 7,900 Ordinary and 1,600 Preference Shares of £10 each."
"Alloa Ale", by Charles McMaster, 1985, page 16.

Though I'm not convinced the capital had really been raised to £400,000. The directors got approval to issue 15,000 new £10 preference shares, but, at least initially, they only issued half of those. And the numbers of cancelled ordinary shares looks strange, too. They'd only issued 10,000 in 1895. Cancelling 7,900 would have left only 2,100.

Let's move on until the final days of Arrol's independence.

A circular issued Samuel Allsopp and Sons, Ltd., of Burton-on-Trent, to the holders of the ordinary shares of the company states that the directors have resolved to issue 466,408 new ordinary shares of £1 each of the company at £1 2s. 6d. per share.

The shares now offered will not participate in any dividend which may be paid in respect of the year ending September 30th, 1930, but in all other respects will rank pari passu with the 466,408 ordinary shares of the company already issued. Should applications be received for a larger number of shares than offered, allotments will be made in proportion, so far as is practicable, to the amount of the holdings of applicants. The proceeds of the present issue will be utilised in payment or recoupment of the purchase consideration of certain new acquisitions of the company and tor the general development of the company's business.

Negotiations have been completed under which the company have acquired or agrees to acquire:

(1) 182,525 ordinary shares of £1 each out of total issue of 183,000 ordinary shares of the Lichfield Brewery Company. Ltd., at the price of £2 per share.

(2) 10,500 ordinary shares £1 each out of total issue of 21,000 ordinary shares of Archibald Arrol and Sons, Limited, the price of £5 per share. Samuel Allsopp and Sons, Limited, have the option to acquire the remaining 10,500 ordinary shares any time prior to September 30th, 1932, at the same price, less any dividends thereon paid in the meantime.

The Lichfield Brewery Company, Limited, is an old-established company owning or controlling 212 licensed houses. Archibald Arrol and Sons, Ltd. own or control 53 licensed houses.
Nottingham Evening Post - Saturday 20 September 1930, page 3."

At first the share numbers made no sense. But, looking more closely, I think they do. There were 21,000 ordinary shares at the time of Allsopp's takeover. But they were £1 shares. So rather than 2,100 £10 shares, there were 21,000 £1 shares. It all fits, in a way. It seems like a bargain. For just £105,000 Allsopp bought the whole company. One that had had a share capital of £250,000 in 1895.

Given the small number of public houses, just 51, they can't have been the reason Allsopp wanted Arrol. Lager is the key. In 1921 Allsopp's Lager brewery had been moved to Arrol's brewery. And it had brewed all Allsopp's Lager for it. No surprise that Allsopp would be keen on gaining ownership of the plant.

Eventually Arrol's brewery was converted to be Lager only. Though it did later go back to brewing some Ale. Until its closure in 1998.

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