Sunday, 18 May 2014

Charrington buys Hoare

It was a sad day when Charrington finally clinched the deal to buy Hoare's Red Lion brewery. Because it meant the end of the road for not just London's oldest brewery but London's oldest business of any kind.

Hoare's had already been around for more than two centuries when it was a moderately successful Porter brewery in the 18th century. It probably dated back to at least 1492, when a Flemish brewer called John Merchant was granted a licence to export beer by Henry VII*.

Walter Hoare, the last family member on the board, wrote to a fellow director:

"I think that you will agree that to most of us it is a tragedy to know that the oldest business in London must shortly be closed down"
One of the conditions of Charrington's offer was that  all brewing be concentrated at their Anchor Brewery in Mile End**. It was a logical enough decision. Their site was much less hemmed in than the Red Lion brewery, which had no realistic prospect of expanding its premises.

For Charrington it was an opportunity to greatly expand their business. Especially as Hoare controlled slightly more pubs than they did, 1,061 to 909***.

Charrington's offer seems pretty reasonable, consisting of a combination of cash and shares in Charrington.

CITY OFFICE of "The Yorkshire Post," 1 and 2 Great Winchester Street, London, E.C.2.
Wednesday Evening.
For some time past there have been confident rumours of an amalgamation scheme in which Hoare and Co., the well-known London brewery undertaking, was stated to be concerned. It is now announced that Charrington and Co.. the Mile-End brewers, have made an offer for the £1 shares of Hoare and Co. The Charrington offer, a condition of which is that holders of at least 90 per cent, of the shares of Hoare and Co. shall accept, is—(a) a sum of £1 10s. per share in cash, (b) three fully-paid Charrington 4 per Cent. Cumulative Preference shares for every five Hoare shares, and (c) two fully-paid Charrington £1 Ordinary shares for every five Hoare shares. In other words, a Hoare shareholder would, under the offer now being made, receive, for every five shares held, £7 10s. in cash, three Charrington. 4 per cent: Preference shares, and two Charrington Ordinary shares. As the existing Charrington Ordinary capital is privately held there is no market quotation for these shares, but, if the scheme goes through, permission to deal in them on  the Stock Exchange will be sought in due course. Generally speaking, the market approved the terms of the offer and Hoare shares receded only about 1s., to 53s.

Finance of the Offer
In order to carry through the deal with Hoare and Co., and Charrington Co. will increase its capital by the creation of 1,169,438 4 per Cent. Cumulative Preference £1 shares and 838,875 Ordinary shares, while the existing shares of both classes, at present of £10 denomination will be split into £1 shares. If the amalgamation goes through, the Charrington share capital will consist of £2,594,438 in 4 per Cent. Preference shares and £2,933,313 in £1 Ordinary shares or a total of £4,933,313. The Charrington loan capital is at present £957,443 in 3.5 per Cent. Debenture stock. It is proposed that the company should increase its borrowing powers to £6,000,000 and that the cash required to complete the deal with Hoare be provided by a new issue of Debenture stock on due course. Considerable economies are expected from the fusion and the Hoare directors, who are interested in more than one-half of the issued capital of their company, recommend the scheme for acceptance.

In respect of 1931, Charrington and Co. paid a dividend of 12 per cent. on the Ordinary shares, against 16 per cent, for each the preceding three years. Their 1932 accounts are not yet available. The last accounts of Hoare and Co. were made up to April 18 1932, and in respect of that year the dividend was cut down from 21 to 17 per cent. Or account of the current period the interim dividend was reduced in January last from 7 to 5 per cent."
The Yorkshire Post and Leeds Intelligencer - Thursday 23 March 1933, page 13.
Of course it was a gamble on Charrington's part. With the creation of new shares they increased the company's share capital by just over £2 million. And they needed to borrow sufficient cash to pay for Hoare's shares. At £1.50 a pop, that's just over £3 million. Plus the directors would be giving up some control, assuming that the privately-held Ordinary Shares were split amongst them and their families.

All that in the middle of the Great Depression and a time when beer consumption in Britain had slumped to its lowest level since the end of WW I.

* "The Red Lion Brewery" by Victoria Hutchings, 2013, page 11.
** "The Red Lion Brewery" by Victoria Hutchings, 2013, page 118.
*** "The Red Lion Brewery" by Victoria Hutchings, 2013, page 118.

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