Rivals set to make S&N bid
Oct 18 2007 By Andrew Mernin, The Journal
BREWER Scottish & Newcastle has described a joint takeover bid by Carlsberg and Heineken as “unsolicited and unwelcome”.
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.
The end? Scottish & Newcastle’s old headquarters in Newcastle is being cleared as a bid is lined up which could finish off the group.
