Capital Pub Company has said Fuller’s offer of 200p per share for the firm, which valued it at £53.9m, “substantially undervalued the business and its prospects”.
In response to this morning’s announcement that its board twice rejected bids from Fuller’s for the 34-strong pub company, Capital said: “The Capital board, with its advisers, considered both the indicative offers of 175p and then the rapidly increased offer of 200p per share and unanimously decided that even the higher indicative offer substantially undervalued the business and its prospects.
“Therefore it was considered to be without merit, rejected and deemed inappropriate to engage further with Fuller’s on these proposals.”
In the statement, Capital said it has a “clearly defined growth strategy of expanding its estate organically and through highly selective acquisitions”, delivering sales growth of 24% in the current year. It plans to grow to 45-50 over the next two years.
“Capital will be reporting its final results for the year ending 26 March 2011 next week on Tuesday 21 June where the management will elaborate on its significant operational and financial progress. As reported on 18 April Capital will also be announcing with its results the resumption of dividend payments to shareholders.
“The Capital board advises that shareholders should take no action.”
Langton Capital analyst Mark Brumby described this as a “fulsome a rejection as could be expected at this early stage” and said Fuller’s “played a well-placed first serve” in its takeover bid.
“Capital could have advised shareholders to do nothing and bought a little time to canvas their reaction but it has laid out its stall immediately.
“One of the most interesting questions is, ‘will Young’s or Greene King get involved’?”
He predicted that Capital is likely to make a holding statement ahead of a longer rejection statement and then, “unless shareholder pressure can be brought to bear on Capital’s board that obliges it to enter into discussions with Fullers and a recommendation can be worked out, the latter will either bid on a hostile basis, or it will not”.
As for Capital’s shareholders, Brumby said: “They are likely to thank their lucky stars that they didn’t dump their holdings at the 2009 lows of 30p (although some of them will have done, of course) and then they may begin to mentally spend the money. In fact, having seen the shares as low as 70p less than 18 months ago, shareholders may well put the desired (by Fullers at least) pressure on directors to enter into discussions.”
He said Capital’s directors “may be able to grind another few pennies out of Fullers (or tempt in a rival bidder) and then the shareholders of the former have a choice because, even if their board subsequently recommends an offer, they are still at liberty to turn it down if they wish to do so”.
“Overall, it would appear as though Fullers has played a well-placed first serve and we await developments with interest.”
Brumby said the development “does suggest that properties in the capital are pretty hot at present”.
