No plain sailing for brewers' S&N aims

By Neil Merrett

- Last updated on GMT

Related tags: Carlsberg, Europe

With a formal bid by Carlsberg and Heineken for European rival
Scottish & Newcastle (S&N) yet to be submitted, the
potential buyers already appear to be having difficulties with the
deal.

Sources close to the deal have today told BeverageDaily.com that European politicians and competition authorities are concerned over the potential share of the European beer market that Carlsberg and Heineken would obtain from such a purchase. Additionally, the same sources stressed that recent falls in Carlsberg's share value would make any move to acquire S&N increasingly difficult. The claims will create further uncertainty over the future of some the world's leading beer brands, if indeed the sale of S&N and its Baltic Beverages Holding (BBH) joint venture, which it owns with Carlsberg, is disallowed. S&N itself said that as the companies had not even made an offer for its operations, that they would not react to, or comment on market speculation. A spokesperson for the group said, that with the ball still firmly in Carlsberg and Heineken's court, there was no impetus to begin considering amending its operations. However, they added that Carlsberg's interest in the purchase was an "unwelcome and inappropriate attempt by a business partner"​ to undervalue S&N's operations for its own aims. The comments come after Carlsberg and Heineken last week said they had entered into discussions over forming a consortium to purchase S&N. In a joint statement, the brewers said that should a deal go ahead, they will split the group's regional operations between themselves. Under the current plan, Heineken would therefore control S&N's Western European operations, including the UK market, while Carlsberg would claim full ownership of the Baltic Beverages Holding (BBH) division, which operates in Eastern Europe. Carlsberg additionally said it had no further comments to make over issues of possible funding or difficulties related to the transaction following last weeks announcement. However, the issue of funding any potential expansion has already been dealt with by the brewer. In June, Carlsberg's chairman Povl Krogsgaard-Larsen was quoted in an interview with the Reuters news agency as saying that the company could potentially raise a $13.6bn war chest for major investments in the sector if needed. "A major deal is likely,"​ he said. "Carlsberg has the strength to become bigger."​ Carlsberg recently amended its statutes to give the group greater powers to raise investment equity for any future purchases.

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