Unwelcome bid could drain last jobs at S&N
Oct 18 2007 By Andrew Mernin, The Journal
The company with a long North-East heritage now employs just 80 people at its Federation Brewery in Gateshead after years of mergers, sell-offs and closures, but still retains a central place in the region’s affections through its iconic products, headed by Newcastle Brown Ale.
Danish firm Carlsberg is looking to buy S&N’s interests in France and Greece, as well as its Eastern European drinks business BBH, while Heineken would take on the UK business and other European operations.
The two companies said they were in talks over a potential cash offer, although they have yet to make a formal approach.
S&N strongly urged shareholders to take no action. The company said: “S&N is confident in its future as an independent group.”
Andrew Miller, head of Barclays Wealth in Newcastle, warned that if the takeover did go ahead. S&N’s operations in the North-East could be sacrificed in the integration process.
He said: “I think the majority of operations have gone from the North-East already, so it won’t have a huge impact on the region, but it’s clear Carlsberg and Heineken are both big international operations so one would presume they are going to integrate into one operation and they are bound to see [closures] as a cost-cutting exercise.”
Scottish & Newcastle, which also makes Kronenbourg 1664 and John Smith’s, has been at the centre of speculation over a potential bid in recent months.
The company’s £6bn stock market value at the beginning of the day jumped to £7.1bn after news of the possible approach.
Martin Slaney, head of spread betting at GFT Global Markets, said there was talk of a possible 800p-a-share offer, valuing the company at £7.5bn.
Mr Slaney said: “Rumours that Carlsberg had been preparing a bid have been in the markets for several weeks. Today’s confirmation is a bonus for those who have been buying into the rumour over the last few weeks.”
The talks between Carlsberg and Dutch company Heineken over a possible offer follow other recent consolidation moves in the sector after Peroni brewer SabMiller announced plans to merge its US operations with rival Molson Coors last week. It also comes after Edinburgh-based S&N confirmed the departure of chief executive Tony Froggatt last month.
S&N is now the world’s seventh-largest brewer by sales volumes after an expansion programme which has seen it grow from a regional operation focused on Scotland and northern England 20 years ago.
But the company warned last August that trading targets for the current year looked very challenging after the wet summer dampened UK customers’ thirst for beer and cider.
The group said the weather had led to significant difficulties in the UK market as it posted lower-than-expected pre-tax profits of £191m, despite a better showing from its international business with strong sales growth in Russia, China and India.
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Long past, but what future at international success?
THE potential carve-up of Scottish & Newcastle announced yesterday would call time on more than 250 years of history.
The FTSE 100 Index-listed maker of Foster’s, Kronenbourg 1664 and Newcastle Brown Ale can trace its origins to 1749, when the William Younger brewery was established in Leith, Edinburgh.
It would grow to become a public company in 1899 before merging with another Edinburgh brewer, William McEwan, to form Scottish Brewers in 1913.
The Newcastle arm of the FTSE company dates from the foundation of the John Barras brewery in 1770. Barras bought the Tyne Brewery in 1884 and launched Newcastle Breweries in 1890. A merger of the two formed Scottish & Newcastle in 1960. The company was the UK’s fifth largest brewer in 1985, focusing on its main Scottish and North-East markets, but rapid expansion saw it become the UK number one by 1995.
That year it doubled the scale of its beer business with the acquisition of Courage – bringing in brands including Foster’s, Kronenbourg and John Smith’s.
S&N’s desire for more rapidly-growing markets saw it push on with acquisitions in countries including Finland, India and China.
But it upset traditionalists at home in 2005 by closing 150-year-old Fountain brewery in Edinburgh and the Tyne Brewery in Newcastle, moving production from the latter to Gateshead’s Federation Brewery.
