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Estate of independents

The door closed on 200 years of brewing and innkeeping tradition last month when the Morrells Brewery and estate in Oxfordshire was sold.


Established in 1782, it had been run by the same family for six generations. Already the new owner has announced it will close the brewery, with a loss of up to 70 jobs, and sell the land to developers.


Traditionalists may bemoan the demise of small players, but Morrells might still have a future as an independent. Rather than having been swallowed by a huge leisure company, it has been bought by a new firm, specially created to take on the estate. To capture the sense of history, the new company has called itself Morrells of Oxford.


Behind it, coughing up the cash, is the colourful Michael Cannon, the man who built up Devenish and the Magic Pub Company then sold them, netting himself nearly £100m in the process.


Cannon now lives in New York and is concentrating on his latest venture, a chain of 204 restaurants called Fuddruckers. His US-based company King Cannon is the major shareholder in Morrells of Oxford, and the individuals running the new business are Cannon’s sort of people.


Morrells of Oxford’s chief executive is Paul Beadle. He first worked with Cannon in 1987, when he joined Inn Leisure which merged with Devenish. When the business was sold to Greenalls in 1993, Beadle went with it as operations director.


“Michael Cannon is a dynamic and intense person. When you work with someone like that it rubs off on you,” says Beadle. “I suppose I’m a younger version. We don’t just talk about things, we do them.”


The rest of the new Morrells team is: John Clarke, former chief executive of Devenish, who is non-executive chairman; commercial director Peter Large, an investment banker specialising in the brewing industry; and personnel specialist Derek Parfitt.


Beadle is adamant that Cannon is just a sleeping partner, but things are likely to be done the Cannon way – after all, he has the golden touch.


Cannon’s first major endeavour was Devenish, which was formed in 1986 from a merger of the existing Devenish estate of 314 outlets and Cannon’s Inn Leisure, with just 40 outlets. At the time the market value was £60m. In 1991 Cannon successfully fought off a hostile takeover bid of £120m from Boddington’s. Two years later he sold the company for £214m.


The timing of his next venture, the Magic Pub Company, was fortuitous. It coincided with the Government’s ruling that the massive brewers must divest themselves of thousands of pubs. The capital realised from the Devenish sale meant Cannon had money to spend just as the market went haywire. The Magic Pub Company bought up 450 Chef & Brewer pubs for just £108m. Cannon sold them two years later for £197.5m.


Despite his financial success, Cannon has been criticised for paying too much for each of his purchases.


“Everyone said he paid too much for Devenish, but he subsequently made millions from it,” says David Morgan, managing director of estate agent David Morgan and Partners, who has known Cannon since 1974. “He will take something and turn it into a success. He is a visionary.”


This time Cannon paid £48m. Again it seems like a lot of money to pay for an ailing brewery and 132 run-down pubs, but Morrells of Oxford had to fight off 19 other bidders to win.


“We did pay a lot for it,” admits Beadle. “But we were paying for what it will become. It is an estate that has been starved of investment for years. Its location is excellent – densely populated, low unemployment, lots of students and visited by tourists.”


The first move is to hive off the brewery. Not one of the 20 bidders for the business included any provision for keeping the manufacturing arm alive. The building will be sold, probably for up to £5m.


“I expect it will be pulled down and redeveloped,” says Colin Wellstead, director of estate agent Christie & Co, which was representing one of the other bidders. “We were surprised by the level of the bid but the rest of the business is in OK condition. It is just underdeveloped.”


Beadle is adamant that the heritage of Morrells Brewery will not be lost even though the original business is to go. Three brands are to be retained, Varsity, Graduate and Oxford. The plan is to contract out production of the beers.


News of the divestment has been greeted with dismay by the Campaign for Real Ale (Camra). It plans to make representations to the new company in favour of retaining the brewery.


“Contracting out production means the beer will be brewed by a different team with different water. It will become a different beer,” argues Mike Benner, head of campaigns at Camra. “It should be kept as it is and promoted as a good local brand.”


The future of the brewery seems doomed, but the future for the rest of the business looks more hopeful. The free-trade side is to be expanded, with a broader range on offer. The pubs, which are the real focus of the new company, are to receive the most attention. On the day the sale was completed, Beadle promised to build on the heritage of the company, pledging “major” investment in the pubs. “The business has a distinguished history,” he announced grandly. “We are now creating an exciting future.”


Exactly what form the future will take is still under wraps, and so is the level of planned investment. Beadle claims he will look individually at each pub, most of which are tenanted, and go from there.


Before the sale, he visited 90 of the 132 pubs in two weekends. On one day he visited 27, suggesting the same energetic approach as Cannon. “You drink a lot of Coke and water when you are in that sort position,” he says.


The first to benefit from investment will be the Berinsfield Arms in the village of Berinsfield, Oxfordshire, which closed in September due to operational difficulties. The plan is to give the pub a face-lift and then reopen it within a few weeks.


“It won’t take vast sums of money to get the business into shape,” says one observer. “Mostly it is just a lick of paint, and Cannon is good at that. He has the skill to turn a pub around and make it hum without spending loads of money.”


Morrells of Oxford is adamant that it is not out to make a fast profit. It is promising investment, continuity and expansion. The millstone of the brewery will be removed, allowing the other businesses to flourish.


But what will happen when the estate is sparkling? Will the new Morrells be able to resist the financial enticements of the big leisure corporations? Heritage and character are highly attractive to the big players, while Cannon’s past record suggests he likes building things up then moving on.


It could be that Morrells has only postponed being swallowed up by one of the larger groups rather than avoiding it completely.

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