Monday, 6 August 2012

Ind Coope and Allsopp merge

This is when Allsopp finally threw in the towel and asked to be taken over. Their position had been shaky since the turn of the 20th century. A late and expensive attempt to build a tied estate severely strained the company's finances. In 1913 the receivers were brought in, but the company limped on after a helping hand from John Calder. The worsening of the general circumstances of the brewing trade after WW I left them unable to restore their finances.

Which is why they asked Ind Coope to buy them out. Why Ind Coope? We'll find out later.

Though the deal is portrayed as a merger, it really amounted to Ind Coope buying up Allsopp. The name of the new company let's you know who was in the dring seat: Ind Coope and Allsopp.

First here are the dull financial details:

Amalgamation with Samuel Allsopp and Sons, Ltd.

Meetings of the debenture holders and of the Preference and Ordinary shareholders of Ind Coope and Co., Ltd., were held on the 24th ult. at the Great Eastern Hotel, Liverpool Street, London, E.C., when resolutions were passed approving the amalgamation of the company's interests with those of Samuel Allsopp and Sons, Ltd.

Col. Sir GEORGE COURTHOPE, Bt, M.C., M.P., presiding at the debenture holders' meeting, said; Under the Scheme of Amalgamation your debenture stock will carry the same rate of interest as at present. You are asked to surrender a debenture redeemable at six months' notice, at par, for a long-term debenture with drawings at 105. I am sure you will all welcome and approve this change.

The total of the authorised debenture issue will be increased from £2,000,000 to £4,500,000. The holders of Allsopp's debenture stocks will receive just over £1,500,000 of our stock in exchange for their present holdings. This will leave just over £1,000,000 unissued and available for future requirements. As the book values of the properties of the two parent companies are based to some extent on old valuations, the boards of both companies asked their managing directors to make an estimation of the current market value of the licensed properties included in the specific securities. This was carried out on the basis of the barrelage of the past three years, and shows that the properties concerned have appreciated to a most satisfactory extent. You will have a floating charge over the combined assets of both groups, which, when they are combined, will form a magnificent security. Provision will be included in the new Trust Deed that, in the event of future issue of debenture stock, additional properties will be brought into the trust, showing a value at least 50 per cent. in excess of the amount issued.

The consolidated statement of assets and liabilities prepared by the auditors shows a surplus of assets sufficient to cover the debenture now to be issued two and a half times, while the average annual profits of the past four years are sufficient to provide for the service of debenture interest and sinking fund three and a half times. In such circumstances we submit the scheme to you with every confidence that your interests are well provided for, and strongly recommend you to accept it.

Addressing the meeting of the Preference shareholders, Sir George Courthope said: With regard to the scheme, at present you hold a 6 per cent. Non-Cumulative Preference share which, if this scheme goes through, will be converted into 6.5 per cent. Cumulative Preference stock; a change which you will all welcome and appreciate. The authorised issue will be increased to £2,000,000, of which you will hold over £660,000. £829,000 will be issued to the holders of Allsopp's 7 per cent. Cumulative Preference stock in exchange for their present holdings.

After the amalgamation it is intended to issue a further £350,000 for cash to supplement the liquid resources of the amalgamated company. When this has taken place there will remain £158,000 for future issue. You will have seen from the circular that the security is ample, both as regards capital and dividend, and your board have no hesitation in recommending the Scheme of Amalgamation for your acceptance."
Brewers' Journal 1934, page 345.

Judging by the way the debenture and other stocks increased, the new company was considerably larger than the old Ind Coope.

Now we can get on with the interesting* bits.

"At the meeting of the Ordinary shareholders Sir George Courthope stated: In putting the scheme before you, I wish to give some reasons why this amalgamation is desirable. The first is a general one. As you all know, since the war a great decline in the consumption of beer has taken place, mainly due to the excessive burden of taxation placed upon it, though partly, perhaps, to the changed habits of our people. In order to maintain economic production and profitable business it is necessary to maintain the output of our breweries. This has only been possible by an increase in the number of licensed houses which form our distributing agencies. To achieve this, both Allsopp's and ourselves, in common with other large concerns, have acquired from time to time smaller brewing businesses, whose houses have been added to our own. But the supply of small brewing businesses is dwindling, with the inevitable result that competition increases for those that remain. The same causes greatly increase the difficulty of maintaining the free trade, which is of great importance both to Allsopp's and ourselves.

In these circumstances, when Allsopp's approached us some months ago with a view to a Scheme of Amalgamation, it seemed to your directors that in your interests we must thoroughly explore the position to ascertain on what lines an amalgamation to your advantage could be arranged, it was obvious to everyone that substantial economies could be expected within a reasonable period, if these two great companies and their subsidiaries could come together.

The two breweries at Burton are side by side. The different departments, which are now in duplicate, could be consolidated in one set of premises or the other. A single analytical laboratory could serve both breweries; the maltings would suffice for all the requirements of the combined concern.

In these circumstances we set to work to find a common basis from which amalgamation could be approached. We decided that the true basis of comparative value was the earning capacity of each company, and its subsidiaries, over a period of years. Many of you may feel that, in view of the dividends paid by the parent companies during recent years, the scheme of exchanging five Ind Coope shares for eight Allsopp's is unduly favourable to the latter. This is not the case, and I think I can briefly explain to you the true position.

Your board have made a practice, when acquiring subsidiary companies, of bringing the whole of their business into the parent concern, and either liquidating the small company altogether, or retaining it in existence as a holder of property, not as a trading concern. We have seven of such subsidiaries in existence to-day, besides "B. Grant," which runs our wine and spirit business. We have expected our subsidiaries to give the fullest support possible to their parent.

Allsopp's have followed a different policy. They have maintained their subsidiaries, of which there are no fewer than 26, and, instead of expecting the greatest possible support from them, have built up the strength of the subsidiaries, somewhat, in my opinion, at the sacrifice of the parent; possibly their maternal instincts are more highly developed than our own. But the auditors' figures prove beyond any doubt whatever that the earnings upon which this scheme is based have been made."
Brewers' Journal 1934, page 345.

Right, so as the supply of small breweries for sale was drying up, a larger merger was, sorry takeover, was required. All with a view to building up a pub estate and have the brewery running full tilt. Buying a brewery with all its tied houses was easier and cheaper than hunting for individual pubs. The vast majority of pubs in England were tied leaving very few available for purchase.

Now let's ask ourselves why Allsopp chose Ind Coope. I suspect the main reason was the proximity of the company's breweries in Burton. Making it possible to physically merge the two sites. You can see how that could save a considerable amount of money. Plus their tied house estates probably didn't overlap too much, with Ind Coope being based in the South East and Allsopp in the Midlands.

Ind Coope and Allsopp continued to brew in both Romford and Burton up until they joined Allied Breweries in the 1960's and beyond.

* In relative terms.


Arctic Alchemy said...

It's interesting that Bass didn't acquire Allsopp, they where physically as close as Ind Coope, and had similar markets and reputations in the home market & export trade.

Barm said...

Bass and Allsopp had been fierce rivals, hadn't they? perhaps that was a step Allsopp's board were not prepared to take, despite everything.

Ike said...

Allsopp's were in negotiations to amalgamate with Bass in 1910-12 but they could not agree. They had also been in negotiation with the lame duck Burton brewers, Thomas Salt, Burton Brewery Co. and Ind Coope, (all in, or near, receivership), from 1906 to 1912. It was failure to make an agreed merger that brought on receivership and and ushered in Calder to sort them out.
The British Brewing Industry - Gourvish & Wilson

Arctic Alchemy said...

Early on, I believe Allsopp and Arthur Bass seemed to be mates, there's a poem of sorts or a tale of the two of them off on a fishing adventure together, and was quoted in the Curiosities of Ale and Beer: