C&C serves up a winner with Tennent’s deal
Fears were expressed that this was just a handy number for guys who found themselves on the street after the S&N takeover.
Were they the right people to take the group out of its current crisis after Magners cider failed to deliver in Britain and bad weather compounded the group’s struggles to establish itself as a publicly quoted company?
The executives were head hunted by C&C chairman Tony O’Brien to fill the vacancy left by Maurice Pratt, who resigned last year after further bad results.
Shareholder mood wasn’t helped by the fact that Pratt had been O’Brien’s choice to lead the company.
And when Dunsmore said at his first meeting with the press last November that he would not be moving to Ireland, that led to some further head-scratching as to how he intended to rescue C&C from its current dilemma.
Just to keep punters further on edge, he added he did not intend having a conventional office as he saw it as an outmoded concept in a world of modern technology that allows him bring his office with him.
Recently, when the group issued wrong guidance to the market, there were some who thought that if he had an office where he could have cast a discerning eye over the trading statement before it went to the stock exchange, C&C would have been spared that embarrassment and probably would have avoided further damage to its frayed reputation.
On top of that, there was little or no comfort in the corrected version of the statement, other than the fact that the underlying earnings outlook was not affected by the changes that had to be made in the guidance document.
Analysts were left wondering how C&C would rescue itself from its difficulties but all that changed on Thursday when C&C announced that for €205 million, it has acquired the Irish and Scottish businesses of AB InBev, including full ownership of Scotland’s leading brand Tennent’s.
It has also signed a 20-year distribution agreement for key InBev brands such as Stella Artois and Becks in Ireland and the North with in-built incentives to grow volumes.
And it has also acquired the Wellpark Brewery in Glasgow and a pub loan book of £27m (€30.7m).
Substantial synergies can be delivered by 2012, while the group said funding will be done through its existing debt facilities and cash reserves.
While it is early days, analysts have described this as a fundamental strategic shift in the group’s commercial position.
Dunsmore has demonstrated his knowledge of the British drinks industry can pave the way for expansion and growth in buying strong regional brands.
Tennent’s and Stella Artois may not be everyone’s idea of fun drinks — Tennent’s never really made it as a long drink in this country — but it has 33% of the draught market in Scotland which gives a direct route to market for Magners and other lines.
This turns C&C into the leading supplier of long alcoholic drinks in Scotland and the number two supplier in the North.
In effect, C&C has fundamentally changed the long-term strategic position of the group to one of growth though acquisition of strong regional brands, offering sales opportunities for its cider range, said analyst Paul Meade in a note on the group yesterday, and should result in double digit earnings growth next year.
If this is an indicator of what the former S&N boss can deliver then the perception of the group is set to change rapidly.
