By Jason Simpkins
Heineken NV (HINKY.PK) has entered into talks with Carlsberg A/S (CABHF.PK) regarding a joint takeover bid for Scottish & Newcastle PLC. The two companies have not made any formal approach, but have said any takeover offer would be in cash. The unexpected announcement came in a joint statement released Wednesday, according to the AFP news service.
"Carlsberg and Heineken confirm that they are in discussions regarding the formation of a consortium to make an offer for the entire issued share capital of Scottish & Newcastle," the statement said.
Scottish and Newcastle, whose brands include Fosters lager and Strongbow cider, said it was confident in its future as an independent group. S&N officials are reportedly "furious" over the reported takeover bid, which would result in the company being split up between the two suitors, and said in response that "the proposed break-up bid from Heineken and Carlsberg, the company's joint venture partner in BBH (Baltic Beverages Holding), is unsolicited and unwelcome."
Scottish and Newcastle has been the subject of takeover speculation all year long.
Carlsberg, the largest Nordic brewer, and Scottish and Newcastle are currently partners in the BBH joint venture. Baltic Beverages owns Russia's largest brewer with a 38% market share, and other interests based in France and Greece. Its revenue grew 36% in the first half to $856 million, while operating profit soared 48%.
If the takeover is successful Carlsberg will take complete control of BBH, and the French and Greek operations, while Heineken would get the U.K. and European brands. The statement didn't specify who would get S&N's Asian assets.
Analyst Richard Withagen at SNS Securities told the AFP news service that the Heineken-Carlsberg takeover was a smart move.
"I think from a strategic point of view it's obviously a good deal for Heineken and Carlsberg," Withagen said, "Heineken would gain market leadership in the UK and become the number two in Belgium and Portugal, and a leading market player in Finland."
In addition to advancing in Belgium and Portugal, a successful deal would give Heineken the top spot in the U.K. where it currently commands less than 1% of the market.
The takeover would also help the two companies to keep pace with SABMiller and Molson Coors (TAP) who recently joined forces. That brewery union could save as much as $500 million a year in manufacturing and shipping costs and provide the combined entity with 30% of the U.S. beer market.
News and Related Story Links:
- Money Morning Investment Analysis:
Thirsty for Profits? Ten Ways to Play the Worldwide Beer Market.
Scottish and Newcastle snubs possible bid from Carlsberg, Heineken.
Carlsberg, Heineken in Talks for Scottish & Newcastle.
- The Financial Times:
Carlsberg, Heineken Poised For S&N Bid.
- The Physics Factbook:
Volume of World Beer Consumption.