Courage makes an acquisition

The 1920's were a great time for expansion, if you had the cash. And Courage was one that did.

There were plenty of breweries which had already been faltering before  WW I, who the 1909 People's Budget had hit hard. The war years had been anything but easy, though many brewers did see their profits rise. The downturn in trade caused by the slump in the early 1920's left many brewery owners looking to sell businesses from which they could make no profit.

Of course, in most cases the purchaser had no interest in the brewery itself. They were just after its pubs, which were still valuable assets.

"FINANCIAL NOTES AND NEWS.
ANOTHER BREWERY DEAL IN PROSPECT.
CITY OFFICE of "The Yorkshire Post,"
1 and 2. Great Winchester Street,
London, E.C.2.
Monday Evening,
We understand that Courage and Co., the well-known London brewery undertaking, has made offer to purchase the shares of the Farnham United Breweries (Ltd.). the prices offered being 25s. for each £1 Six Per Cent. Preference Share and 45s. for each £1 Ordinary Share. Farnkham United Breweries Shares have recently been advancing, especially the Ordinary, which at the end of last week were quoted about 38s., while the preference stood about 19s., so that the prices offered by Courage and Co. seem favourable to the Farnham Company's proprietors. Farnham United Breweries (Ltd.) have a share capital of £225,000, of which £100,000 is in Ordinary shares, and the balance in Six per Cent. Preference shares. The distribution to Ordinary holders has in recent years been rising, that for the twelve months ended September last being 10 per cent., or 2 per cent. more than for 1924-25. Courage and Co. are, of course, a much larger concern, with a share capital of £1,500,000, of which £1,100,000 is in Ordinary Shares. There has been a very substantial advance in profits year by year, the net figure for 1926 being £383,914, increase of £62,458 on that for the preceding twelve months. The Ordinary dividend for 1921 was 15 per cent., that for 1925 20 per cent., ; that for 1926 23 per cent. Courage Ordinary' Shares stand in the market at just over £3 per share."
The Yorkshire Post and Leeds Intelligencer - Tuesday 12 April 1927, page 15.

Farnham is in Surrey, to the Southwest of London. Not far from Courage's home and in a relatively prosperous part of the country. I can understand why it would be an attractive target. Judging by the share capital of the two companies, Courage must have been at least 10 times the size of Farnham United Breweries.


I make Courage's offer worth £381,250 - or quite a bit more than the nominal value of Farnham's share capital. And a fair sum of money back in those days.

Despite that expense, Courage still made a very decent profit:

"Courage & Co.— The whole of the expenses in connection with the acquisition of the Farnham United Breweries and of the new share issue during the year have been written off profits. Profit £378,682 (against £421,914). £40,000 to rebuilding reserve account. Final dividend on Ordinary shares 16 per cent., less tax, making again 23 per cent, for year: carry forward £97,602. The premium on the new share issue, £262,500, has been placed to premium on Ordinary shares reserve account.
Dundee Courier - Thursday 23 February 1928, page 2.

And they still had half a million quid in reserve:

"Courage & Company.
As generally expected, the directors of Courage & Co., Ltd., have maintained the interim dividend at 7 per cent. The shares were little affected by the announcement, being around 67s 6d.

This concern has had a very successful career, and has paid 23 per cent, for each of the past two years, this payment being on a slightly increased capital last time.

There is a reserve fund of nearly half a million pounds, but, as the company has recently acquired two other breweries, this fund may be utilised for further purposes."
Dundee Courier - Monday 30 July 1928, page 2.

All this left Courage in a great position to expand through acquisitions and they would have been fools not to. The way the pub trade was structures, buying other breweries for their pubs was about the only way to grow rapidly.