Capital Pub Co rejects Fuller's bid

London brewer and pub operator Fuller's has had a £53.9m bid for the 34-strong Capital Pub Company rejected.

Fuller's wrote to the Capital board on 22 March offering a cash offer of 175p per share, which was turned down. It then returned with an increased offer of 200p per share, including the potential dividend of at least 2.1p per Capital share referred to in Capital's announcement of 18 April 2011. That bid was also rejected.

That bid valued Capital at £53.9m and represented a premium of 29% on yesterday's closing share price, a premium of 53% above the share price at the time of the offer and a 35% premium on the average share price over the past three months.

"Fuller's is aware of Capital's stated growth strategy which it believes will likely require further equity issuance," it said.

"Fuller's considers that there are considerable risks associated with the successful execution of this strategy that could dilute the overall quality and attractiveness of Capital's estate and which could have a negative impact on valuation over time.

"In contrast, any offer by Fuller's of 200 pence per Capital share would provide Capital shareholders with the certainty of a cash exit in the near term at a substantial premium.

"Fuller's is therefore disappointed that Capital's Board has declined to engage with it so far.

"Fuller's would like to work towards a recommended transaction and establish a constructive dialogue with Capital.

"Fuller's believes that it is in the interests of Capital shareholders for the Board of Capital to engage with Fuller's in order to deliver an attractive cash offer in a timely manner."

Capital said the offer "substantially undervalued the business and its prospects".

It said: "Therefore it was considered to be without merit, rejected and deemed inappropriate to engage further with Fuller's on these proposals.

"Capital has a clearly defined growth strategy of expanding its estate organically and through highly selective acquisitions. 

"This successful strategy has built the estate to 34 London pubs operated today and delivered sales growth of 24% in the current year.

"The Company has a stated plan to grow its estate to 45 - 50 pubs over the next two years to further enhance shareholder value."

Leading City analyst Paul Hickman of Peel Hunt said a bid by Fuller's or any other company would eventually succeed at a price of around 220p per share.