Heinekin raises S&N acquisition's synergy benefits target
23 Aug 2008
Heineken NV yesterday said that after a substantial review of the Scottish & Newcastle (S&N) acquisition in April, it has increased the expected pre-tax synergies from the acquisition over four year by 21 per cent to EUR 184 million and EUR 152 million respectively as a result of an increase in cost synergies.
The brewer says that it had already achieved EUR 60 million of annualised cost synergies in August. Based on its review Heineken says it is also confident that it will realise the expected revenue synergies of EUR 45 million.
It also disclosed that it had refinanced a portion of its bank credit facilities for the S&N acquisition by raising new long-term debt of EUR 742 million.
The key results of its business review are:
- Total expected pre-tax synergies over four years increase 21 per cent to GBP 145 million before tax up from GBP 120 million,
- Restructuring costs related to the synergies are expected to total EUR 120 million, mainly related to cash redundancy payment
- Confirmation that the acquisition will be value enhancing by the fourth full year (2012).
- Due to declining consumer confidence and higher interest rates it is uncertain if the acquisition will be EPS accretive in 2009
- On an annualised basis, EUR 60 million of synergies related to S&N have already been achieved by the end of August 2008 mainly as a result of:
- Integration of Heineken's UK import organisation into S&N UK
- Integration of S&N's import business in the USA into Heineken USA
- Closure of the Head Office of S&N
Heineken also said that it had drawn up the unaudited provisional condensed opening balance sheet from 1 May 2008 and had also compiled the unaudited pro forma condensed income information for the full year 2007 as if Heineken had acquired the relevant S&N businesses as from1 January 2007, with the pro forma information derived from S&N's 2007 financial information and adjusted to reflect Heineken's accounting policies, taking into account cost related to the acquisition
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