The New York Times-20080126-Scottish - Newcastle Agrees to Be Bought and Split
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Scottish & Newcastle Agrees to Be Bought and Split
Full Text (596 words)Scottish & Newcastle, Britain's largest brewer, agreed on Friday to a $:7.8 billion ($15.4 billion) takeover by the European rivals Carlsberg and Heineken.
After three months of negotiating on the price, Carlsberg and Heineken agreed to pay $:8 in cash for each share of Scottish & Newcastle, which makes Foster's and Kronenbourg 1664 beer. The takeover offer represents a 26 percent premium to the value of Scottish & Newcastle's shares on Oct. 16, a day before the two companies said they were considering a takeover. They raised their bid three times from an initial offer of $:7.2 a share.
The deal is not cheap, but it offers some opportunities, said Marcel Hooijmaijers, an analyst at Landsbanki Kepler in Amsterdam.
A smoking ban in pubs and bars and consumer worries about rising living costs and slowing economic growth have hurt sales at brewers, leading them to explore takeovers in faster-growing markets like Russia and search for ways to gain market share at home.
SABMiller, one of the world's largest brewers, accelerated consolidation in the industry when it and Molson Coors Brewing merged their United States units and it bought Royal Grolsch, Heineken's closest Dutch rival, for $1.2 billion last year.
In an unusual transaction, Carlsberg of Denmark and Heineken will divide Scottish & Newcastle's assets between them and share the bill, with Carlsberg taking a slightly larger part. Heineken will obtain the British business, and Carlsberg will take full control of Russia's largest brewer, which it owned with Scottish & Newcastle. The deal is unusual because Heineken and Carlsberg are helping each other increase their share of some markets in which they are direct competitors.
The acquisition will make Carlsberg the world's fastest-growing global brewer, Carlsberg's chief executive, Jorgen Buhl Rasmussen, said in a statement. Heineken's chief executive, Jean-Francois van Boxmeer, said it was a significant step for Heineken and creates opportunities in profitable markets to grow the premium Heineken brand.
The takeover will give Heineken access to Britain's cider market, which is growing 18.6 percent a year and is expected to help offset falling beer sales. Heineken said it expected to save $:120 million a year from the transaction.
It will also get Scottish & Newcastle's businesses in Ireland, Portugal, Finland, Belgium, the United States and India, where the British company owns a minority stake in United Breweries, the owner of Kingfisher beer.
Heineken has been reluctant to pay up for takeovers in the past, but a decline in market share and available acquisition targets prompted the bid for Scottish & Newcastle's assets, some analysts said.
The Dutch brewer backed out of a plan in 2005 to buy Grupo Empresarial Bavaria of Colombia, which was then acquired for $5.6 billion by SABMiller. Its largest purchase was the 1.9 billion euro takeover of the Austrian brewer BBAG in 2003.
Baltic Beverages Holdings, the Russian brewer that Carlsberg is gaining control of, is expected to increase earnings before interest and taxes by 34 percent, to 990 million euros ($1.5 billion) by 2010 as Russia's beer market is expected to grow 5 percent this year. That compares with a 5.7 percent drop in beer sales in Britain's bars and pubs in the first half and a 4.5 percent drop at supermarkets and convenience stores, according to Scottish & Newcastle.
Carlsberg will also obtain its operations in France, Greece, China and Vietnam.
[Illustration]PHOTOS: The chief executives of Heineken, Jean-Francois van Boxmeer, left, and of Carlsberg, Jorgen Buhl Rasmussen. Below, bottles of Newcastle Brown Ale moving along a production line. (PHOTOGRAPHS: ABOVE, STEPHEN HIRD/REUTERS; BELOW, JOHN GILES/PRESS ASSOCIATION, VIA ASSOCIATED PRESS)