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I'm a bit dismayed by some of the recent comments below suggesting that the future of Marston's lies in flogging off it's remaining brewing assets. I agree that the JV was probably a forced option in order to reduce the debt level, but please God don't let Marston's disappear down the same hole that Carlsberg took Tetley's
(Joint Venture) Clue is in the title. They haven’t flogged anything off. By the same logic every time a junior miner JVs with a major they give there license away to the major, fortunately this is not the way it works and you know that.
Joint venture in my opinion would be a 50/50, however carlsberg take the controlling share with 60%, for the contract period yes this will run as brewing however when this ends I would not be surprised with it going down the tetley route
And that’s where the 273m balancing payment then came in. Doesn’t really matter what happens, there will always be one or two that find a reason to complain haha
The Company receives £239m on completion the remaining, up to £34m, is payed 12 months after completion and dependant on the price of a basket of Company's.
Marstons Brewing Co has been regarded as the Jewel in the Company's Crown. The JV as anyone knows will enable the Company to reduce it's huge debt pile.
Based on the respective sales of Marstons (£389m), Carlsberg (£414m), a 50/50 split would have seemed appropriate, however as is easily seen by those who have followed MARS these past few years a cash offer could not be resisted. It is entirely likely following the aborted sale of Pitcher and Piano last year and then the hugely discounted Sale to Admiral, RF was between a rock and hard place and the approach to or from Carlsberg was extremely opportune.
It should be noted that whereas Marstons sales had increased year on year for at least 3 years whereas in the same period Carlsberg sales have fallen each year (17-19 inclusive). Carlsberg are relatively cash rich and Marstons not.
I have projected Marstons share of profits from the JV, previously, and just to standstill sales for the Joint Venture must grow by 22% in the first 5 years. Be in no mistake Carlsberg will call the shots, they already have. Just hope the requirement of Marstons to retain at least 50% of Pubs is not a "Bear-trap".
Dismissing the possibilty of a "Tetley" situation is ignoring Carlsberg's record in JVs/Takeovers.
Anyone who believes Carlsberg is a Charity need to seek help.
The problems for the whole industry are manifest and only time will prove who is right and who is wrong.
Very true and well put FD. For now at least, it should see us past Covid which stands Marstons in a better position that many others - Take covid off the table and there’s every chance it would have been a 50/50 split. If Carlsberg are indeed cash rich on the other hand then they’ve been doing something right along the way and RF may learn a trick or two in the process.
Thanks for the comments FD. Looks like the writing's on the wall for the brewing arm already. I'm assuming that Carlsberg will retain the brewery here in Burton for the production of some of the bigger brands like Pedigree, but if they were to move production elsewhere it would be a big loss for the town.
FD
As usual a very interesting & accurate summing up of where we are.
Only point I would add is that the payment by Carlsberg which is earmarked to repay debt can presumably only be used against their cheaper bank debt and not the unpleasant securitised instruments out to 2035, which were taken out in the mid 2000's at a fixed rate of approx 6%, "with a very significant redemption penalty".
This is a cross we have to bear for a further 14 or 15 years, and is the bulk of the debt, figures taken verbatim from a reply to me by RF following my enquiry 4 years ago.
Clearly when these were taken on they appeared a cheap option, and with inflation would be less important each year, trouble now is inflation is not happening even with the massive stimuli, indeed with a real chance of negative interest rates we could see deflation