The Wall Street Journal-20080118-Scottish -amp- Newcastle Is Drawn Into Deal Talks
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Scottish & Newcastle Is Drawn Into Deal Talks
LONDON -- Brewers Carlsberg AS and Heineken NV succeeded in getting takeover target Scottish & Newcastle PLC to the negotiating table with a GBP 7.8 billion ($15.3 billion) offer.
If successful, the 800-pence-a-share offer, the consortium's fourth approach, would put an end to a long-running and bitter takeover battle that focused on a Russian venture between Denmark-based Carlsberg and U.K.-based S&N.
In December, the consortium was issued a so-called put-up-or-shut-up order by a U.K. regulator that gave the joint bidders until Jan. 21 to make a formal offer for S&N or walk away. That deadline has been extended until Jan. 24.
The three companies said there is no certainty a formal offer will be made. The latest proposal from the consortium is subject to certain conditions, including completion of limited due diligence. The consortium has said it won't pursue a deal without a recommendation from the S&N board.
Last week, S&N, brewer of Kronenbourg 1664, John Smiths and Newcastle Brown, turned down a 780 pence-a-share offer from the consortium. Talking at 800 pence a share is the right thing to do for both sides and the deal seems likely to go ahead, said Sanford Bernstein analyst Trevor Stirling. "There's considerable incentives from both sides to make this work."
S&N shares rose on the news, climbing 5.4%, or 39 pence, to 765 pence in late trading on the London Stock Exchange. Mr. Stirling said the shares were lagging behind the offer price because it could be more than six months before shareholders receive cash.
If the talks fail and the takeover deadline lapses, Heineken and Carlsberg would be blocked from making another offer for the U.K. brewer for six months.
The latest offer is the fourth indicative proposal from Copenhagen- based Carlsberg and Amsterdam-based Heineken. The first, at 720 pence a share, was made in October.
There was no mention from any of the three companies yesterday of the main point of contention until now -- the valuation of Carlsberg and S&N's highly profitable Russian joint venture, Baltic Beverage Holdings. The valuation has been a point of dispute between S&N and Carlsberg, with S&N accusing the Danish brewer of trying to gain control of the venture "on the cheap."
S&N said last week that it wouldn't discuss a bid from Heineken and Carlsberg unless the offer was raised to 800 pence a share and Carlsberg agreed to the release of future sales and profit forecasts for the joint venture. While the offer has been raised accordingly, no additional information on BBH has been released. "We are still pushing for that information to be released to our shareholders," an S&N spokesman said yesterday.
S&N has started legal proceedings against Carlsberg, hoping to force the Danish brewer to offer S&N its share of BBH, which operates 19 breweries in Russia, Ukraine, the Baltic countries and Kazakhstan.
Mr. Stirling said he expects the two sides to agree to a release of BBH information as part of their talks.
Under the consortium's proposals, Carlsberg would take control of BBH as well as the U.K. brewer's French, Greek and Chinese operations, while Heineken would take control of the U.K., the U.S., India and S&N's other European markets.
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Steve Goldstein contributed to this article.
