Pressure on for suitors to raise S&N bid

Published on Saturday 12 January 2008 16:20

HEINEKEN chief executive Jean-Francois van Boxmeer is expected to push his consortium partner Carlsberg into raising their 780p-a-share joint offer for Scottish & Newcastle this week in a move that would bring the two sides nearer to a deal.

With S&N refusing to countenance any offer below 800p, the Danish-Dutch duo need to find another 200m to get their Edinburgh target around the negotiating table.

S&N is also believed to be talking to at least two private equity firms and one international drinks group about acquiring half the Edinburgh company's stake in Baltic Beverages Holding, the Russian business it jointly owns with Carlsberg.

This would lend financial clout to S&N if it opted to trigger the so-called shotgun clause in BBH.

The clause dictates that any offer by either of the partners for the whole of BBH forces the other party to sell or match the offer. S&N believes the venture is worth considerably more than the consortium's valuation.

It is thought it may be close to announcing a deal with another party which would increase pressure on Carlsberg and Heineken to raise their offer for the Scottish company.

Van Boxmeer insisted in an interview with Scotland on Sunday that the preferred route remained a recommendation from the S&N board on its "fair and full offer" that values S&N at 7.6bn. "No recommendation, no deal," he declared, suggesting the consortium will walk away if S&N refuses to talk.

But he also refused to rule out raising the offer or going hostile if another bidder emerges. "It is not yes or no," he said. "We think there is a strong basis for them to want to talk to us and I urge the shareholders and board of S&N to consider their position."

He pointed out that in the current climate, the offer was an attractive one for S&N shareholders. "It is a tough environment. Just look at what is happening out there," he said.

"This is not a game, it is a serious business. Another 20p in a gamble is nothing, but (in this bid] it means another 200m and you have to earn that back to make it work for your shareholders. That equation is what we face."

But asked what the consortium would do if a third party emerged, he said: "We cross that bridge when we come to it." He said that he did not believe there were other obvious bidders waiting to pounce.

However, S&N is believed to be looking at a number of options that include private equity and trade buyers acquiring 25% of BBH – half of its own share of the lucrative venture at the heart of the takeover tussle.

Carlsberg has said it would not launch a hostile bid for S&N, and the offer would lapse without a recommendation.

While some S&N shareholders – including Legal & General and Scottish Widows Investment Partnership – want more information on BBH in order to make a decision, others fear that S&N's intransigence will force the consortium to walk away and that the share price would then collapse.

The bidding consortium faces a January 21 deadline stipulated by the UK Takeover Panel to make a formal bid. S&N shares closed at 734.5p.