All became clear when the company entered administration in early May, news that did come as a severe shock. Sighs of relief were breathed later in the month when it was announced that it had been acquired by London-based investment company Breal Capital, thus ensuring the future of the brewery and preserving 150 jobs.
Somehow this all seemed a bit too convenient, and it must be remembered that the company’s shareholders and creditors – including HMRC – ended up losing all their money, while their lenders suffered a severe haircut. One very significant loss was that of the CAMRA Members’ Investment Club (CMIC), who at the last valuation held shares valued at £395,000, accounting for 2.39% of their whole fund and 13.57% of Black Sheep’s issued capital. As someone with a small holding in CMIC I have suffered a personal loss of a couple of hundred pounds.
I recently came across this blog by a disgruntled investor in Black Sheep who points out a long sequence of management failures and poor decisions. I have no knowledge of this beyond what has been publicly reported, but if even half of this is true it is extremely damning. In particular he points out that in 2016 Paul Theakston rejected an offer from Marston’s of £4 per share, whereas shortly before the company entered administration the price was only around £1.20. (Although, given Marston’s subsequent history, it’s unlikely that the brewery would have survived until now). He also suggests that, given their substantial holding, CMIC should have taken a more active role in monitoring the company’s fortunes.
The directors blamed difficult trading conditions caused by Covid lockdowns and the “cost of living crisis” for the company’s failure. Yes, times were hard, but many other companies have survived without coming anywhere close to the brink. In most business failures, not just in the brewing sector, what brings companies down is not so much poor trading as excessive borrowing that leaves them dangerously exposed.
In such situations there are no magic solutions, and it is often a case of being caught between a rock and a hard place and having to make hard choices. The business and the jobs have been saved, but the investors and creditors have been hung out to try. And you do have to wonder whether “pre-pack” administrations of this kind are in practice a kind of get out of jail free card for incompetent or reckless directors.