Friday 15 November 2019

C&C pressed to fund buy-backs and stick to home markets

C&C's portfolio includes Bulmers
C&C's portfolio includes Bulmers

Michael Cogley

BULMERS cider-maker C&C is understood to be planning to increase borrowing as an activist investor took a stake in the company and pushed the Irish-listed business to make a series of changes.

New York-based hedge fund Orange Capital has built up a 4.9pc share in C&C through a type of security known as a contract for difference (CFDs).

While reports suggest that Orange Capital has 'secretly amassed' its shares in the company, sources close to C&C say that it has been aware of the stake-building in the company "for some time".

Orange Capital has called on C&C to move away from its international expansion, including the United States, and focus on its primary markets in Ireland and Scotland, according to a report in the 'Financial Times'.

That would fly in the face of a strategy that most recently has seen C&C linked to deals to take over pubs and drink distribution businesses in an attempt to break into Britain's core English market.

Sources close to C&C say that the company was already aware that it needed to address its US business. Orange is also calling for the company to take on more debt to fund further share buybacks, rather than targeting takeover deals.

Sources close to the company say that C&C had already indicated it would increase its debt to earnings before interest, tax, depreciation and amortization (EBITDA) ratio from 1.1-times currently to 2-times and that the company spent €30m on buybacks in the last financial year.

In a statement the company said it agreed with some of Orange Capital's assessment.

"We have an ongoing dialogue with all of our major shareholders and the issues they raise are closely considered by the board.

"With Orange Capital we agree in some areas but our responsibility is to run the business in the long-term interests of all shareholders."

C&C is known to be eyeing acquisitions, though. The company is currently valued at about €2.1bn and entered into talks with Carlsberg over a purchase of its UK brewing operations in August but no agreement was reached.

As well as Bulmers and Magners cider, C&C produces Scotland's biggest-selling beer, Tennent's. The bulk of C&C's sales are in Ireland and Scotland, but the company has made no secret of ambitions to break into new markets.

A 2012 push into North America, buying Vermont Hard Cider Company for €235m, has so far proved costly.

Last year C&C lost out in bidding to buy UK pub-chain operator Spirit Pubs, which was eventually sold to bigger rival Greene King for £774m (€1bn).

Shares in C&C closed up 1.1pc at 3.65pc yesterday.

The stock has traded in a range since the start of the year of €4.00 a share at the top and €3.23 a share at the bottom.

Orange Capital was founded in 2005 by Daniel Lewis and Russell Hoffman. The hedge funders say their aim is to generate returns independent of wider markets trends.

Irish Independent

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