Carlsberg Seen Pushing S&N Bid to 770p for Talks

Carlsberg Seen Pushing S&N Bid to 770p for Talks

Source: Reuters
07/01/2008

London, Jan. 7 - Brewers Carlsberg and Heineken are expected to raise their bid for Scottish & Newcastle Plc (S&N) to 770 pence a share later this week to bring the British brewer into takeover talks, analysts said on Monday.

They point out if the consortium raises its bid by 20p to 770p in cash to value the Edinburgh brewer at 7.5 billion pounds ($14.8 billion), then ensuing talks may extract another 10p from the bidders, and many shareholders would sell at 780p.

Carlsberg and Heineken are currently offering 750p a share, or 7.3 billion pounds, for Britain's biggest brewer, and the UK Takeover Panel has put a deadline of January 21 for the consortium to make a formal bid or walk away.

"It is probably inevitable that Scottish & Newcastle does accept a bid at some stage, and Carlsberg/Heineken only have to push it up a bit to succeed," said analyst David Liston at Barclays Wealth.

The brewer of Kronenbourg and Foster's has rejected all approaches from the consortium and refused talks, but analysts say uncertain financial markets and a cash offer on the table have put shareholders under some pressure to sell out.

"We continue to believe the next move will be a slightly increased offer for S&N from the consortium, from the current 750p to 765-770p," said analyst Matthew Webb at Cazenove.

He expects this will encourage S&N to start talks with Carlsberg and Heineken, which he sees being concluded with a recommended offer in the 780-800p price range.

Ten analysts in London polled by Reuters saw 770p as the average new bid price from the consortium, with the lowest estimate at 765p and the highest at 775p.

BID DEADLINE

With the consortium sticking to its friendly approach and seen unlikely to go hostile, analysts say it will have to make its intention firm by later this week so it can present a formal bid by the deadline of 1200 GMT on January 21.

Analyst Andrew Holland at Dresdner Kleinwort says an agreed bid at a higher price of 770p or more is the logical outcome, while he says S&N shareholders will not want the bid to disappear and hence the share price to fall.

He said since the 750p bid in November, the pound has fallen 4 percent against the euro and Danish Crown, reducing S&N's UK profits on translation, but it also means the consortium could raise its bid to 780p without paying more in local currencies.

S&N's main defense is to seek a "true" valuation for its Russia-based joint venture Baltic Beverages Holding (BBH) which it runs in the former Soviet Union along with Carlsberg, and gives both brewers access to fast-growing beer markets.

S&N says the bid approach breaches the BBH deal and has taken Carlsberg to court saying the move triggers a shotgun agreement that allows either party to make an offer to buy the other out of BBH, and a court decision is due by July 3.

Analysts say Carlsberg is in danger of losing its 50 percent of BBH, possibly at a low price, and the only way to avoid this possibility is to bid successfully for S&N.

S&N has said it will give further details of its legal case in its fight for BBH in early January, and analysts say it will be keen to get out these details as soon as possible ahead of the likely increased bid from the consortium.

S&N shares were off 0.2 percent at 727-1/2p by 1410 GMT compared with the 750p bid price on the table, while Carlsberg shares were up 1.4 percent at 593 crowns and Heineken down 0.6 percent at 43.75 euros.

Under the consortium bid plan, Carlsberg would acquire S&N's 50 percent stake in BBH as well as businesses in France, Greece and China, while Heineken would take control of S&N's business in Britain and other European markets, as well as its United States and Indian businesses.


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