A PROPOSED merger between two of the North-East's biggest brewing names appeared a step closer last night, as the long-running speculation over the future of Wolverhampton & Dudley Breweries (W&DB) sparked up again.

W&DB, owners of Camerons Lion Brewery in Hartlepool, were at the centre of rumours that private equity group UBS Capital was in management buyout talks for the group, as negotiations regarding the future of the Castle Eden Brewery appeared to have reached an advanced stage.

The Northern Echo revealed in November that talks between Camerons and Castle Eden looked like resulting in a tie-up between the two.

It is believed that the deal would see the Castle Eden site sold, and the one brewing operation centred in Hartlepool.

With all parts of the W&D operation up for sale, Camerons, currently running at full capacity, is the ideal location to centre the new operation. Staff from the Castle Eden Brewery would transfer down the road to the Camerons Brewery.

The only possible block to the deal would lie in the possibility of a predatory firm stepping in to snap up the famous Lion name.

Management from W&DB briefed the 150 employees at Hartlepool late last year about the current situation with respect to a possible takeover of the Midlands-based firm.

Shares at W&DB leapt 11 per cent on the whispers of a management buyout - bubbling up 48p to 483p at the end of trading, valuing the company at £456m.

Wolves has been the subject of speculation since August, when 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 the approach, which was understood to value the company at 500p-a-share, or £472m.

There was later speculation Botts could lift the price to 550p a share, but it was then thought this would be lowered following a fall in market values in the sector.

Speculation increased in October, when Wolves said it had begun a strategic review that could lead to its sale.

Rumours later emerged that the group could be the target of a management buyout approach at around the 500p to 520p mark.

Other expectations, which emerged last month, has been that Enterprise Inns could join Breare's team to bid for Wolves.

Today's rumours said UBS Capital was in talks over a buyout of around the £470m mark.

A spokeswoman at UBS said: ''We do not comment on market speculation.''

Wolves also refused to comment, with a spokesman saying: ''We do not comment on press speculation.'