"Allied-Lyons wins race to purchase Drybrough
By Andrew Wilson
Allied-Lyons has bought Edinburgh-based brewers Drybrough paying the Grand Metropolitan subsidiary Watney Mann & Truman Brewers subsidiary a total of £48.5 million. Included in the deal are 155 pubs in Scotland and 32 in the North East of England.
Brewing will stop immediately at the Craigmillar site although keg filling and distribution will be maintained. There will be some 29 job losses initially although Allied-Lyons said yesterday that the Alloa Brewery head-office staff could well be transferred to Craigmillar.
Allied added that the deal is good for the brewery industry as it combines two relatively small operations in Scotland so that it can become an "adequate critical mass." Drybrough, with an annual capacity of 300,000 barrels has 7% of the Scottish market which is similar to that of Allied's Alloa Brewery.
Drybrough Heavy will be transferred to Alloa where there is an annual capacity of 500,000 barrels or 144 million pints. It is expected that once the operation is fully integrated, Alloa will produce in excess of 400,000 barrels annually.
Initial market reaction was that GrandMet had dealt well. Although Drybrough has a book net asset value of £25m, with the pubs worth another £5m, Allied does appear to be buying the company at almost 19 times rumoured 1986 pre-tax profits of £4m.
But it defended the price by pointing out that this figure included an undisclosed GrandMet head office charge while there would be substantial savings to Allied from the integration.
The deal will increase the number of Allied pubs in Scotland to 400, or 30% of the brewery-controlled pubs, and there will be no earnings dilution. The pubs are in good condition so that there will not be any significant refurbishment costs.
Somewhat surprisingly, the valuation of the properties has yet to be completed although an Allied spokesman said they had a good idea as to their worth.
But Allied will find it heavy going to expand the number of retail outlets quickly in the face of a Scottish & Newcastle and Bass market share of around 80% of the beer market.
Allied issued almost 14.3 million shares which were placed with some difficulty yesterday by Cazenove at 347p with the discount of only 4p on the overnight 351p considered somewhat tight. Allied shares eased 5p to close at 346p.
The agreement comes after discussions with various other parties. These are believed to include Belhaven, which is now headed by former Arthur Bell chairman Raymond Miquel. He is anxious to expand Belhaven into a national premium brand beer with the existing capacity at Dunbar believed to be well under 100,000 barrels.
The Drybrough brewery capacity would have given Belhaven a substantial increase in line with English regionals such as Greene King and Marston's.
The sale leaves GrandMet with its three English breweries. These are Websters in Halifax, Mortlake in West London and the 850,000 barrels a year brewery in Brick Lane in London's East End.
Discussions are now taking place with Elders on the contract whereby Grad Met brews the Australian Fosters lager under a licence until 1996.
GrandMet will have to be bought out although the talks are amicable and could well involve some property exchange between the Elders Courage subsidiary.
Budweiser is also brewed by GrandMet under contract with an annual production of around 100,000 barrels.
GrandMet shares firmed 2p to 457p."
The Glasgow Herald - Jan 10, 1987, page 15.
Typical that they sold the brewery to someone who didn't actually want it. Well not to brew in. Though the Alloa Brewery itself didn't last that much longer, closing in 1998.
300,000 barrels is a fairly decent amount. For a regional brewer. Clearly just chicken-feed for the big boys. With just three breweries left, I wonder what the total capacity of GrandMet was? The 850,000-barrel brewery in the East End was Truman, which itself wasn't around much longer, closing in 1988. It was the beginning of the Big Six eating themselves. It's weird. I didn't care for them much at the time, but now I feel all nostalgic about Bass and Courage.
Note how two breweries - S & N and Bass - controlled a disproportionate amount of the Scottish beer market. 80% between them. Which was far more than their share in England. According to a 1986 Courage estimate, the national on-sales market share of Courage was 7%, of S & N 14.7% and of Bass 22.9%.
The bit about the number of brewery-controlled pubs in Scotland got me reaching for my spreadsheet of pub numbers. If 400 was 30% of them, that means the total number was 1,333. In 1988, there were 4,472 pubs in Scotland. Plus 2,959 hotels. I'm not sure if the figure mentioned in the article included both groups. If it didn't include hotels, that means 30% of Scottish pubs had a brewery tie. If it did, it drops to just 18% with the tie. Either figure is way below the percentage of pubs tied in England.