Drinks group Merrydown, which produced cider in Sussex for more than 50 years, has given its blessing to a £36.7 million takeover by the owner of the WKD spirits brand.

Shares in Merrydown, which makes the Shloer soft fruit and Merrydown cider brands, shot up 14 per cent as terms of the 170p-a-share deal with SHS Group were announced.

Directors said the deal represented fair value for investors and recognised SHS had the size and resources to be able to grow its brands at a faster rate.

SHS, which controls 11 per cent of shares in the company, owns the WKD and Woody's drinks brands and supplies food to supermarkets through businesses including Farmlea Foods.

The company is privately owned, employs more than 500 staff in the UK and made annual sales of £254 million and pre-tax profits of £19.2 million in 2003.

Based at Newtownabbey in County Antrim, SHS also has sites at Cumnock in Ayrshire, Torquay, Northampton, St Albans and Cheltenham.

Under the stewardship of managing director Chris Carr, Merrydown emerged as a takeover target in mid-November and yesterday's deal represents a premium of 66 per cent on the share price then.

Chairman Andy Nash said: "Whilst the directors remain confident of Merrydown's future prospects, they recognise that a larger organisation such as SHS has the resources to grow the brands faster than Merrydown can as an independent company."

SHS chairman Joe Sloan said "We at SHS are in the business of building quality brands. We are therefore delighted to be adding Shloer and Merrydown Cider to our portfolio."

Merrydown has come through a painful restructuring since 1998, aimed at simplifying the business and putting resources behind its two core brands.

This process culminated in the closure of its factory in the village of Horam where production began more than half a century ago.

Merrydown's offices have been moved to Reigate, Surrey, where the Shloer management team is based and production is being transferred to a number of sub-contract manufacturers.

The company said the strategy had paid off after sales of Shloer increased more than three-fold since 1998, while sales of Merrydown Vintage cider were stronger after a tough period in the cider market.

In November, Merrydown reported its first interim profits in four years of £800,000, compared with losses of £100,000 a year earlier.

Thursday February 17, 2005