The battle for control of London pubs hots up

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Speaking as he unveiled a jump in profits and a return to dividend payments, chief executive and founder Clive Watson said: "We have a growth strategy and want to continue doing what we are doing. We are the only remaining independent London pub company. London deserves a freehouse operator."

Fuller made public its 200p a share bid last week. The pub trade regarded this as on the cheap side, but assumed the argument was merely about price given the assumption that Watson would be happy to sell the business once he reaches his target of between 45 and 50 pubs.

Today Watson indicated he might prefer to stay in charge of a firm he believes in than see it fall into the clutches of a bigger company.

"I think we have such a great story. Fifty pubs was a target set by ourselves, we could keep going as long as shareholders want us to and management want to keep doing it. We can be a major player in London. It is not just about money."

The £54 million bid valued Watson's 7.5% stake at around £4 million.

In the year to March, Capital saw revenue at its 34 pubs up 24% to £27 million. Profits lept 48% to £4.1 million, allowing the company to pay a dividend of 2.25p, the first since 2008.

Asked if he actively disliked Fuller's, he replied: "It's not a question of like or dislike. It's a question of whether they would be a good parent."

Capital's own notes on the bid in its statement conceded that Fuller's would be able to "extract significant synergies from beer supply and cost savings" if a takeover went ahead.

Ian Berry at broker Cenkos said in a note: "Good quality freehold London pubs are difficult to buy and it has taken Capital Pubs 10 years to painstakingly acquire its estate. Capital Pubs represents a unique potential acquisition opportunity for a larger business and in due course it will be acquired by a larger operator."

Berry says the Fuller's bid is "woefully inadequate".

Capital has slashed its gearing from 90% to 52% and agreed new bank loans.

Its pubs include The Merchant on Battersea Rise and The George on the Strand.