Sights set on Scottish & Newcastle

After months of rumours, Carlsberg and Heineken have confirmed that they are in discussions on a possible bid for rival brewer Scottish & Newcastle.

Morningstar.co.uk Editors 17 October, 2007 | 2:46PM
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No formal approach has yet been made, but speculation points to a bid at around the 800p per share mark. The shares are currently 763p, up 126p today. A price of 800p would value S&N shares at £7.5bn. It has £1.9bn of debt, giving an overall price tag of £9.4bn.

The deal would see Carlsberg take over S&N’s business in France and Greece. The real prize, however, would be the 50% stake in BBH (Baltic Beverages Holdings). Carlsberg owns the other half and has made no secret of its desire to get its hands on the remaining share of this leading brewer, which operates in Russia, the Ukraine, Kazakhstan and the Baltic States.

Heineken would take over S&N’s business in the UK and other European markets. This split should circumvent any competition issues in the UK, as Heineken left the mainstream UK lager market several years ago.

A bid became more likely with the appointment of Jorgen Buhl Rasmussen as chief executive of Carlsberg in September. Rasmussen was in charge of the brewer’s Eastern European interests, including BBH, so had had dealings with S&N before.

Possible counterbidders include SABMiller, which has looked at S&N in the past, and AnheuserBusch, the US owner of Budweiser. S&N's main brands are Kronenbourg 1664 and Foster's.

The group has previously said it would defend itself against a takeover, but left itself vulnerable with a poor first half. The group is also under a new CEO. John Dunsmore took over from Tony Frogatt in September. Dunsmore was promoted from inside the group, but may have a different strategy in mind.

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