Brewer Wolverhampton & Dudley has said "active discussions" about a possible takeover of the business are continuing.

The news came as the owner of the famous Camerons Lion Brewery in Hartlepool admitted that severe flooding in October and November had hit its sales.

The brewer has been the subject of speculation about its future since little known private equity group Botts, working with leisure entrepreneur Robert Breare, said it was considering making an offer for the group.

The brewer poured cold water over that approach, which was understood to value the company at 500p-a-share, or £472m.

Earlier this month it was reported that private equity group UBS Capital was leading management buy-out talks.

Chairman David Miller said: "Active discussions with a number of interested parties are continuing, although it should be noted that the outcome of these discussions cannot be certain."

Talks between Castle Eden Brewery and W&D for the sale of the Camerons Brewery are believed to be ongoing.

If Castle Eden was successful in a bid for Camerons, it is likely that it would move its operations to the Hartlepool brewery, allowing it to sell its Castle Eden site to a private housing developer.

A spokesman for Castle Eden said: "Talks between ourselves and Wolverhampton and Dudley are continuing but nothing has been decided.

"The deal would not be a merger, but a takeover of Camerons by Castle Eden. We do not know if W&D is talking to any other companies about Camerons."

W&D reported turnover in the 13 weeks to the end of December had lifted to £153.5m, up 18.4 per cent on last year.

The increase was largely the result of Wolves' acquisition of Mansfield Breweries in December 1999.

While the performance of the group as a whole was in line with expectations, severe flooding led to difficult trading during October and November, with 65 pubs in the Midlands and Yorkshire affected.

In Wolves' retail division, like-for-like sales, excluding income from new openings and refurbishments, in the 14 weeks to January 6, were down 2.4 per cent on last year while community pub sales slipped 0.9 per cent.

During the critical six weeks to January 6, total like-for-likes were off 0.5 per cent, while community pubs were ahead 0.8 per cent.

The group's Union Pub Company also performed in line with expectations, with the impact of disposals last year and the transfer of 51 pubs from a management to a tenancy footing offsetting weaker trading in October and November, again because of the poor weather.

Like-for-like volumes for the 13 weeks to December 30 were 6.1 per cent lower than last year, although this decline reduced to 2.4 per cent in the final five weeks of the period.

But Wolves' brands division, which includes its core Bank's, Pedigree and Harp Irish Lager brands, saw a strong start to the year in October and November, said Mr Miller.

Both turnover and net operating margins were in line with expectations.

Mr Miller also said he would delay stepping down as chairman, a move which had been due to take place at the annual general meeting, until the strategic review had been completed.

He reiterated that, if Wolves remained an independent, listed company, it would have to cut back on its brewing operations, although this is not expected to mean a wholesale pub closure programme