Probably the best way to foil a rival
Oct 22 2007 By Andrew Mernin, The Journal
BREWER Scottish & Newcastle is planning to thwart a hostile takeover by its rivals by selling its most valuable asset.
The firm, which has a long North-East heritage and employs 80 people at its Federation Brewery site in Gateshead, was stunned last week when Heineken and Carlsberg revealed they were plotting a bid to split the brewer between them.
However, the Newcastle Brown Ale brewer is reportedly planning to defeat the move by selling Hartwall – the Finnish company which holds S&N’s £2.5bn, 50% stake in Russian beer business BBH.
The sale of Hartwall would circumvent a complex arrangement with Carlsberg, which also owns 50% of BBH and is keen to acquire the other half.
Under the so-called ‘shotgun’ clause, if one of the partners in the joint venture makes a proposal to take it over, the other partner must either accept it or make a counter-bid.
However, if a bidder takes control of BBH by acquiring Hartwall, this clause is no longer relevant. Analysts say that finding a way to unlock the value in BBH, Russia’s number one beer brewer, is key to S&N’s survival.
They say that a take-out by a third-party bidder should reflect the depth of BBH’s distribution platform in Russia and neighbouring Kazakhstan and Uzbekistan.
John Nicolson, managing director of S&N’s eastern European, Asian and US operations, told the press he believed Carlsberg is trying to buy BBH with a "lowball" offer.
He said: "They think going for S&N means they can get BBH on the cheap. They know exactly the value of it and Heineken doesn’t.
"We’ve just finished our three-year plan for the business. People find it hard to evaluate businesses in Russia, but we know what it is worth and so does Carlsberg. The future is very bright."
According to informed analysts, BBH’s enterprise value is around £4.8bn.
Meanwhile, S&N has also been linked with takeover bids from SABMiller, which makes Peroni beer, and Anheuser-Busch, the brewing giant behind the Budweiser brand.
Both companies are understood to have been in contact with S&N although talks are thought to be at a preliminary stage and nothing is expected to happen until Carlsberg and Heineken make a formal approach.
S&N, which was once a major employer in the North-East, has seen its presence in the region diminish in recent years following a series of mergers, sell-offs and closures.
The company brews Kronenbourg 1664 and John Smith’s as well as its iconic Newcastle Brown Ale product.
