Mumabi: UK beer maker Scottish & Newcastle has accepted a take-over offer of 7.8 billion pound ($15.4 billion) by a consortium of Danish and Dutch brewers Carlsberg and Heineken. The UK Takeover Panel yesterday agreed to extend the bid deadline for a second time, until midday today, after moving the date to January 24 from the original timeframe of January 21.
Edinburgh-based S&N is the UK's largest brewer, with brands such as Newcastle Brown Ale and Foster's, and is the world's seventh largest brewer by sales volume.
It holds a 37.5 per cent stake in Vijay Mallya's United Breweries, which will be acquired by Heineken.
"While the UB Group has had an excellent and productive relationship with S&N Plc during the period of association, we welcome the fact that Heineken will be associated and be a potential shareholder of United Breweries on terms that are yet to be agreed," chairman Mallya said in a statement.
Mallya said there was great potential for combining strengths of the two companies to tap the Indian beer market.
Carlsberg and Heineken had proposed a 720p-acquisition offer, in October (See: Brewers Carlsberg, Heineken gang up against Scottish & Newcastle; S&N taking evasive action), which the UK brewer rejected as being "unsolicited and unwelcome".. They raised their bid in November to 750p (See: Scottish & Newcastle rejects improved bid from Carlsberg and Heineken), prior to the current increase.
Scottish & Newcastle owns or has an interest in over 50 breweries worldwide, producing more than 50 million hectolitres annually. The group has more than 15,000 employees in direct operations in Europe, another 15,000 in joint ventures in Eastern Europe and over 7,000 in joint ventures and invested companies in Asia (including the UB Group in India).
S&N and Carlsberg co-own Baltic Beverages Holdings AB, whose earnings are expected to surge on rising Russian demand for Baltika and Nevskoye beer. Carlsberg wants full control of BBH.
Carlsberg will get control of S&N's operations in France, Greece, Vietnam and China, as well as BBH.
In addition to the UK, Heineken will get units in Ireland, Portugal, Finland, Belgium, the US and India. S&N owns 37.5 per cent of UB, the owner of Kingfisher, India's largest beer brand.
Carlsberg and Heineken said they offered 800 pence a share in cash for the maker of S&N's Foster's beer and Strongbow cider.
The offer represents a 26-per cent premium to S&N's closing price on October 16, the day before the consortium said they were considering an offer. Carlsberg is paying 54.5 per cent of the total and Heineken the remainder.
Heineken will continue to sell Kronenbourg beer under licence in the UK, which will be made by Carlsberg in France, the Danish brewer said.
Carlsberg expects to save 1.3 billion kroner a year, before taxes, including savings on production and distribution, from the third year after the takeover is completed. It plans to finance the deal through new debt facilities and an equity bridge loan.
The company said it has 29 billion kroner of new bank facilities to finance the deal and hired banks, including Lehman to underwrite a stock sale to raise 31.5 billion kroner ($6.2 billion). It didn't give timing for the rights offer. Analysts expect the financing to eventually go through when markets recover.
Scottish & Newcastle had earlier said that UK beer and cider sales were unchanged in the fourth quarter as reduced consumer spending offset growth in brands such as Strongbow. Sales in the UK during the quarter was down 2 per cent from a year earlier.Heineken said it would save £120 million pounds a year by buying S&N's UK assets.
(See: UB promoters plan stake hike after S&N deal)