Monday, 26 October 2015

Big Debenture Scheme by Hammonds

Takeovers can have a downside. They can make a company’s financial structure very complicated.

Because a company that has been purchased by another doesn’t immediately cease to exist. It will stick around until it’s wound up in the proper way. This could often be years after the purchase. Which was the case at Hammonds. For many years the companies they had absorbed continued on, often retaining their own directors and holding their own board meetings, even though power lay elsewhere.

It made sense to tidy things up. Which is what happened in 1951 at Hammonds.

Big Debenture Scheme by Hammonds Breweries
Notes from Our City Correspondent— Friday Evening
A £1,250,000 Debenture issue and conversion scheme announced by Hammonds United Breweries of Bradford has as its main object the simplification and further co-ordination of the administration of the group.

Three subsidiaries are to be liquidated, entailing the repayment of five issues Debenture stocks. The concerns affected are the Ilkley Brewery and Aerated Water Company, the Springwell Brewery Company and Seth Senior and Sons. Holders of the Debenture stocks will be repaid par, with the exception of the 4.5 per cent. "A" stock of the Springwell Brewery, which has to be redeemed at 105 per cent.

As alternative to repayment, Debenture holders may convert into a new 4 per cent. Debenture stock, 1981, created by the parent company. At the same time the holders of Hammonds 4 per cent. Perpetual Debenture stock are to be invited to exchange into the new issue, on the basis £102 nominal for every £100 of existing stock.

The directors intend to issue £1,260,000 of the new 4 per cent, stock, of which £782,550 is being reserved to meet conversion acceptances. The balance of £457,450 and any stock not required for conversion purposes will be offered for subscription at par by all Debenture and shareholders within the group. The proceeds of the cash issue will be applied buying further licensed premises, the repayment of mortgages and loans and the provision of further working capital.”
Yorkshire Post and Leeds Intelligencer - Saturday 23 June 1951, page 6.

Liquidating a company was complicated, as various Debenture stockholders needed to be bought out. The money had to come from somewhere – so why not issue new Debentures to pay off the old ones? Hammonds gave stockholders the choice of cash or new Debentures. It wouldn’t surprise me if most went for the dosh.

It’s significant to see the first item mentioned in use for the cash is buying more pubs. Expanding their tied estate was most breweries’ obsession. The extra cash knocking around Hammonds would also have been useful for further takeovers.

They didn’t have much trouble shifting the Debentures:

Hammonds' issue success
Hammonds United Breweries announce the issue of 4 per cent. Mortgage Debenture Stock 1981 has been fully subscribed and that the underwriters have consequently been relieved.”
Yorkshire Post and Leeds Intelligencer - Saturday 14 July 1951, page 6.

1981, eh? Presumably the stock never reached maturity, whet with Hammonds having disappeared into the corporate soup a couple of decades earlier.

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