S&N calls time on takeover approach

Oct 26 2007 by Iain Laing, The Journal

BREWER Scottish & Newcastle yesterday rejected what it called a "derisory" £6.8bn takeover approach from European rivals Carlsberg and Heineken.

S&N chairman Sir Brian Stewart accused the pair of attempting to buy the Edinburgh-based business "on the cheap" with the 720p a share approach, which is lower than the brewer’s current share price.

Sir Brian said: "This unsolicited and derisory offer is an effort to get S&N’s unique portfolio of businesses on the cheap. We will continue to take all actions to maximise shareholder value. I strongly urge shareholders to take no action."

Danish firm Carlsberg and Dutch brewer Heineken plan to carve up S&N if they succeed in their overtures for the business. Their approach is conditional on a board recommendation and extensive due diligence. The rejection of the initial approach comes after market speculation that the suitors may have to pay up to 800p a share, which would value the firm at almost £7.6bn.

S&N has also reportedly sounded out Peroni brewer SABMiller and American beer giant Anheuser Busch over a possible counter-deal as the European duo’s pursuit becomes increasingly acrimonious.

The brewer said on Tuesday that it was looking at ways to oust Carlsberg as a partner in its lucrative Russian beer business, Baltic Beverages Holding (BBH). S&N, which shut its massive Tyne brewery in 2005 and now only has 80 Tyneside staff at its Federation Brewery in Dunston in Gateshead, said that Carlsberg had breached the terms of the 50/50 joint venture, a claim later denied by the Danish firm. BBH – thought to be worth around £2.5bn – is a key attraction for Carlsberg, as it produced operating profits of £160m for S&N last year. The brewer wants to buy S&N’s stake in BBH to capitalise on the fast-growing Russian beer market, as well as taking on the firm’s operations in France and Greece under the takeover plans.

Heineken, meanwhile, is looking to gain S&N’s UK business and operations elsewhere in Europe.

S&N, which traces roots as far back as 1749, has around 3,300 staff in the UK with breweries in Manchester, Reading, and Tadcaster, North Yorkshire.

Carlsberg and Heineken said they wished to pursue a deal with the support of the Scottish & Newcastle board. They said: "The board of S&N has rejected the proposal, has not granted the consortium its request for limited due diligence and refused to enter into discussions.

"The consortium strongly believes that its proposal is strategically compelling and that a recommended transaction is in the best interests of S&N’s shareholders."

The pair said their 720p a share proposal was at a 36% premium to the share price of 531p seen on March 28, the date immediately before speculation first arose around a possible offer for S&N.

Any deal would see Carlsberg take on 50% of BBH, the French and Greek operations as well as participation in S&N’s Chinese business. Heineken would hold the remaining businesses, principally the UK & Irish, Portuguese, Finnish, Belgian and US operations as well as participation in an Indian business.