Family ties seal Wells and Young's merger deal

While for Young's the not-insignificant matter of realising between £80m and £100m from the sale of the brewery site played its part, the close friendship between Oliver Wells, president and former chairman of Wells, and Young's chairman John Young smoothed the path to the tie-up between the two brewers.

"The companies have always been very good friends and my father has known John Young for many years," said Charles Wells' chairman Paul Wells. "We've had a clear strategy when it comes to speciality beers and classic cask ales. This is a very nice fit, adds Young's brands to our range and gives us a leading role in the cask ale category."

Family ties aside, the merger of the two brewing operations sees an end to more than four hundred years of brewing on the Wandsworth, south London site.

The merger sees the formation of Wells & Young's Brewing Company Ltd, held 60/40 in favour of Wells. Management from the latter dominates the board of the new entity, with Paul Wells chairman, and Wells' head of brands Nigel McNally as managing director. Young's will be represented by chief executive Stephen Goodyear and finance director Paul Whitehead.

Key brands for the new entity will include Wells Bombardier, Wells Eagle IPA, Kirin Ichiban, Red Stripe, Young's Bitter, Young's Special and Waggledance. The new group will also exclusively import and distribute Corona Extra, the Mexican bottled lager. Both companies have stated their intention to retain the current brand range as stand-alone products, although neither could rule out changes in the future.

The Wandsworth closure means the loss of 95 jobs at Young's brewery, which will brew its last cask ale on September 30. Head brewer Ken Don will oversee the transfer of the group's brewing operations prior to his retirement, and Young's said 35 new jobs will be created at the Bedford brewery under the new arrangements.

• In the financial year ended September 2005 Wells brewed around 300,000 barrels and there is expected to be a degree of headroom at the brewery for further expansion.
• Young's claim that following a taste-matching and product quality trials due to take place over the summer it will have transferred all of its brewing capabilities to Bedford by October 1.
• Distribution and warehousing will remain at the Wandsworth site until its relocation to a new 'satellite' depot late next year. All of Young's staff and corporate functions, including estate managers for the managed and tenanted pubs, will also relocate next year to a new head office in Wandsworth.
• Both groups have entered into exclusive three-year rolling supply agreements for their respective estates, and the earliest such agreements can be terminated is October 2011.

Key to the deal being given the green light was Wandsworth Council's decision to reschedule the 5.5 acres of land upon which the brewer sits as fit for residential and commercial development. It had previously been earmarked for light industrial, which severely hampered its development potential. A spokesman for Young's said a deal with property developer was "a matter of weeks away".

Mr Wells meanwhile said the merger will enable both groups to better engage with consumers, enhance the sales and marketing brief and generate more revenue.

"We'll be able to exchange areas of expertise. Both retail sides will have opportunities to use a wider range of brands, but at the end of the day we will let the licensees decide. There is no point in forcing beers on people."

Mr Wells says his company was the first brewer to allow guest ales bar space in its pubs and he is keen to maintain this freedom of choice following the Young's deal.

"At the end of the day Young's still has an ownership interest in a brewery and both companies remain vertically integrated. This is a merger of brewing brands. Strategically we see things the same way," he said.

Young's said it expected the merger would result in an annualised revenue increase of £2.5m, while it aimed to use money from the brewery site sale in its pub estate.

Young's results in brief​

As it revealed details of the merger with Charles Wells' brewing arm, Young's announced results for the year to April 1 2006. The group pointed to what it called a "resilient" retail performance, with managed pub sales up 3.2 per cent and profits - up 6.5 per cent - boosted by a 10 per cent hike in food sales. Total beer volumes grew 0.6 per cent, but production dipped 0.8 per cent. An exceptional charge of £2.6m took into account costs of the operating review, the move to AIM and "employment related matters". Chief executive Stephen Goodyear said sales in the seven weeks to May 20 were up 10.7 per cent, "with strong like-for-like growth".