Heineken/Carlsberg continue their battle for control of S&N

Scottish & Newcastle figures itself to be another “Braveheart” as it turns down Heineken’s and Carlsberg’s raised offer of 750 pence per share. Who’s playing to the gallery?

Trust the City guys to have a way with words. That’s why it was only a matter of time before someone would call Scottish & Newcastle’s behaviour following the takeover offer by Heineken and Carlsberg a “Braveheart defense”. Crying freedom, Scottish & Newcastle now figures itself to be a modern day Scottish hero – one who would rather go down heroically than to succumb to a foreign invader.

Just like the Scottish hero William Wallace, played by Mel Gibson in the 1995 epic “Braveheart”, who led the Scottish resistance to Edward I’s military campaigns against Scotland in the 1290s. As history tells us, Wallace was captured in 1305 and taken to London for a show trial at Westminster before being condemned to die a most gruesome death.

Judging by its PR campaign, Scottish & Newcastle (S&N) is certainly doing a good job in putting off its eventual demise. In a very cunning move, S&N has styled itself a victim even though there is nothing wrong with Heineken and Carlsberg offering S&N’s shareholders a premium on their shares.

After having had their initial offer rebuffed by S&N, they launched a second offer which has been met with a similar fate: turned down. Funnily, both attacker and attacked are not even shouting at each other across the trenches. No, they are only talking to intermediaries like the media and the bankers who, unsurprisingly, give the conflict their own spiel.

Ah, nothing could be more delightful than a bloody and drawn-out takeover-battle.

According to British media, Sir Brian Stewart, Chairman, Sir Angus Grossart, Director and newly appointed Chief Executive John Dunsmore have formed a kitchen cabinet to look at every option rather than succumb to the increased GBP 7.3 billion bid from Heineken and Carlsberg.

CEO John Dunsmore, S&N’s new man on the job, has to fight off a hostile bid. Photo: S&N

The options being considered include a break-up to bring in partners to buy out Carlsberg’s 50 percent stake in Russian joint venture Baltic Beverages Holding, valued by the bidders at about GPB 3.2 billion. Alternatively, S&N could sell its own stake – which it believes is worth GBP 1.0 billion more than the current offer – to a white knight such as SABMiller.

Since the bid has been tabled, S&N has had approaches for nearly every part of its operation. It could sell its beer businesses in Britain – worth GBP 2.5 billion to GBP 3 billion – France, Finland and Portugal to different bidders and achieve a higher price than that offered by the Europeans.

S&N deepened its rift with Carlsberg when it confirming that it would attempt to buy out the Danish brewer’s 50 percent stake in BBH if arbitration before a Swedish court is successful.

Both Carlsberg and Heineken have publically acted as if they have been wronged by S&N. However, they recognise they will have to up the ante. The question is by how much? A final bid pitched at 800 pence per share would silence S&N’s board. It is widely believed that S&N’s shareholders would take the money in preference to a break-up. A bid pitched at 780 pence could achieve the same result. But success would not be guaranteed, although shareholders might be very concerned if the board rejected this in the same robust manner it has the previous two. S&N’s shareholders remember only too well Sainsbury’s recent takeover saga. J Sainsbury, a food retailer, saw its share price fall rapidly when the bid talks collapsed.

City analysts believe that SABMiller could mount a rival bid. However, SABMiller’s board seems to be divided over how much S&N is worth, and at 780 pence may decide to sit this one out, it was reported.

With bated breath, the City awaits Heineken’s and Carlsberg’s next move.