Scottish & Newcastle rejects higher offer

Management at brewing group Scottish & Newcastle have rejected an increased offer from the Heineken/Carlsberg consortium, labelling it with the time honoured phrase 'wholly inadequate'.

Morningstar.co.uk Editors 15 November, 2007 | 3:13PM
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The consortium raised its offer by 30p, to 750p, valuing S&N at an equity value of £7.3bn and an enterprise value, including debt, of £9.7bn. Heineken and Carlsburg said they had decided to release the new proposal directly to the market after S&N’s rejection of its initial indication and its refusal to engage in discussions.

S&N chairman Sir Brian Stewart retorts: 'Carlsberg and Heineken’s marginally increased proposal continues their attempt to get S&N’s unique portfolio of business on the cheap. The board is highly confident in the actions being taken to maximise shareholder value, and strongly urges shareholders to take no action.'

S&N in turn condemned Carlsberg’s continuing refusal to disclose relevant information about prospects for Baltic Beverages Holding, which, it said, was essential to assess the proper value of the Russian joint venture.

BBH has been seen as the prize asset in S&N portfolio. Carlsberg and S&N own 50% each and Carlsberg has made no secret of its desire to own the whole lot. It seems curious that S&N professes not to know the state of play when it owns half the business.

In an attempt to woo shareholders, Heineken and Carlsberg pointed to S&N’s recent statement on ‘challenging conditions’ across Western Europe. This remains its key market, providing the majority of its sales, operating profits and operating cash flows.

There is speculation that S&N plans to dispose of its Elidis unit in France. The consortium urged the S&N board to postpone any decision until Carlsberg had had a chance to assess the implications.

Under the proposed deal, Carlsberg would take over S&N’s business in France and Greece, plus its share of BBH, while Heineken would take over S&N’s business in the UK and other European markets. This split is designed to circumvent any competition issues. Carlsberg will contribute 54%, while Heineken will contribute 46% of the bid price.

The 750p offer is a 41% premium to the closing share price on 28 March, before speculation started. The shares hit 760p today, up 19.5p on the day, with the market clearly expecting the bid to keep rising.

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