Young & Co, the London-based brewer, has confirmed it is to merge with Charles Wells, its Bedfordshire rival, to form a separate company called Wells' & Young's Brewery Company (WYBC).
As reported by M&C Report yesterday, the merger will see the new company own, brew and wholesale the combined beer portfolio of the two groups, which includes Bombardier, Red Stripe, Special as well as Young's eponymous standard bitter.
Under the terms of the deal Young's will hold a 40% stake in WYBC, with the remaining 60% being held by Charles Wells. The two companies' pub divisions will remain independent.
WYBC will own the Eagle Brewery, Charles Wells' Bedford production plant. The move will create a brewer with annual barrelage of more than 700,000.
The move will also see Young's sell the Ram Brewery site and the nearby Buckhold Road offices in Wandsworth for about £80m.
The group is thought to be in advanced discussions with a property developer but no deal has yet been agreed.
WYBC will begin trading on 1 October.
Stephen Goodyear, chief executive of Young's, said: “The creation of WYBC brings together two complementary brewing businesses with unrivalled brewing heritage.
“Having resolved our brewing options, we can concentrate on completing the sale of the Wandsworth sites, which would unlock substantial capital to continue to build Young's high quality pub estate and enhance shareholder value.
“Young's will continue to be a vertically integrated business with a substantial interest in a modern and efficient brewery. At the same time, this deal will enable us to make a step change in the financial performance of the company.”
The news came as the company reported full-year pre-tax profit of £7.6m, an 18.3% drop on the year. Excluding exceptional items, which included the costs incurred with the group's move to AIM, and the review of the Ram Brewery site, pre-tax profit was up by 1.8% to £10.3m.
Turnover for the 52 weeks to 1 April increased by 3.6% to £123.9m.
Operating profit before exceptionals was £13.6m, a fall of 0.6%. The company invested a total of £13.5m during the year.
Turnover at the company's managed pubs was up 3.2%, while profit increased by 6.5%, helped by a 10% rise in food sales.
Like-for-like turnover and operating profit across the 112-strong managed estate were up by 4.6% and 4.7% respectively.
A total of £10.8m was invested on both new and existing sites, with three new sites acquired at Vauxhall, Fulham and Battersea on 999-year leases at peppercorn rents.
Young's tenanted houses saw an increase in turnover of 0.1%, with profit up by 5.9%. Like-for-like turnover and operating profit were up by 2.3% and 4.8% respectively.
During the year the company invested £1.1m in its tenanted estate, which currently stands at 96 sites.
With reference to the planned smoking ban, the group said, “while there may be some initial downside, the medium to long term affects will, we believe, be positive”.
Sales for the seven weeks to 20 May at the group's retail business were up 10.7%.
Two pubs have been acquired during the period, with negotiations on a further five tenancies underway.
Total beer volumes were up 0.6% at 179,159 barrels, but production was down 0.8%.
Goodyear said: “We have produced a resilient performance, particularly in retail, in a year of considerable change, which included new licensing laws, our transfer to AIM as well as the uncertainty surrounding our future brewing operations.
“We look forward to the future with great enthusiasm and confidence.”
