Cider maker C&C defends Spirit bid after profits drop

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Irish cider maker C&C Group yesterday defended its bid to buy British pub chain Spirit, arguing it needs greater scale to battle competition in England, where profits dropped sharply.

An almost three per cent dip in third-quarter profit, a lacklustre performance in its key markets and worries over its strategy after the bid helped send C&C shares down more than eight per cent to 3.4 euros, their lowest level in over two years. C&C has lost 15 per cent of its value since it said last week that it had made an approach for 1,200 pub chain Spirit, a deal it hopes would boost sales of its drinks brands, which include Magners cider and Tennent’s lager.

Analysts have questioned potential savings from a takeover, and the company’s ability to manage the additional assets.

Chief executive Stephen Glancey said the purchase of pubs by brewers had a long history of success in Britain, and argued his executives had experience in the market.

“The combination of cash flow coming from brand ownership and distribution has proved to be quite a powerful concept,” Glancey said. Spirit is particularly attractive because of its exposure to London, he added.

Spirit, which has recommended a rival offer from Greene King, has rebuffed C&C’s approach.

A source said the C&C offer was slightly higher than the Greene King bid of 109.5p per share, valuing the chain at £723m.

It also had a larger cash component, the source said.

C&C has until November 20 to submit a firm, improved offer to secure the pub chain. Glancey declined to comment on whether the group could improve on Greene King’s offer.

In the quarter, C&C reported a 2.7 per cent drop in operating profit to 69.2m euros, dented by a drop in the US and tougher competition in Britain.

C&C said volumes in the US were down 21 in the first six months, with operating profit 90 per cent lower. Operating profit in England and Wales was down by 37 per cent.