 BEERS WAR! -
Carlsberg and Heineken Guzzles British Brewer
 There have been many dramatic changes in the global beer
industry in the recent past. InBev and SABMiller were created.
The consortium of Carlsberg and Heineken has succeeded in its
£7.8bn ($15.3 billion) bid to buy the UK’s last National brewer,
Scottish & Newcastle (S&N).The ranking of the world’s leading
brewing groups, once dominated by brewers from West Europe and
the Americas, now includes Chinese companies such as China
Resources, Yanjing and Tsingtao. China overtook the USA as the
world’s largest beer market in 2002 and growth of the Russian
market has also been dramatic, with consumption having trebled
since 1998. And, India cannot be far behind says Dr. Mohan
Krishna.
 Ending
a takeover battle that began last March, the 800 pence-a-share
deal brings down the curtain on 259 years of independence for
Scottish & Newcastle, which would be carved by its continental
suitors within next 10 months.
SABMiller, one of the world’s largest brewers, accelerated
consolidation in the industry when the company and Molson Coors
Brewing merged their U.S. units and it bought Grolsch,
Heineken’s closest Dutch rival, for €816 million, or $1.2
billion, last year.
In this year January, Scottish & Newcastle accepted 7.8 billion
pound (10.5 billion euro, 15.5 billion dollar) takeover bid by
Carlsberg of Denmark and Heineken of the Netherlands.
Carlsberg and Heineken agreed to pay £8 in cash for each share
in Scottish & Newcastle, the maker of Foster’s and Kronenbourg
1664 beer, having raised their offer three times from an initial
£7.20.
The takeover offer, worth $15.4 billion, values Scottish &
Newcastle’s shares 26 per cent higher than they were on October
16, 2007 the day before the two companies said they were
considering a takeover of the company, the largest British
brewer.
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Smoking ban in pubs and bars across Europe, as well as
consumer worries about rising living costs and slowing economic
growth, have hurt sales at brewers generally, leading them to
try to build market share at home and explore takeovers in
faster-growing markets like Russia.. "The deal is not cheap but
it offers some opportunities, probably the Consortium didn’t
want the deal to die" says Dr. Mohan Krishna
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 In an unusual transaction, Carlsberg and Heineken will divide
Scottish & Newcastle’s assets between them and share the bill,
with Carlsberg taking a slightly larger share. In addition,
Heineken and Carlsberg are helping each other increase their
share of some markets in which they are direct competitors.
Heineken
will get operations in Britain, Ireland, Portugal, Finland,
Belgium, the United States and India, which generated an
operating profit of about 472 million euros ($689 million) in
2007.
Carlsberg, which is paying 54 per cent of the total price-tag,
will get the 50 per cent it doesn’t already own in Russia’s BBH
as well as operations in France, Greece, China and Vietnam.
The takeover will give Heineken access to Britain’s market for
cider, which is growing 18.6 per cent annually and expected to
help offset falling beer sales. Heineken is expected to save
£120 million a year by buying Scottish & Newcastle’s British
operation.
Heineken is already a successful by 2010, as the Russian beer
market is expected to grow dramatically.
Carlsberg, which is being advised by Lehman Brothers, is
planning a 3.15 billion pounds rights issue to help pay for the
purchase, which has been underwritten by BNP Paribas, Danske
Bank, Lehman Brothers and Nordea.
Meanwhile, Heineken, which is being advised by Credit Suisse,
has secured debt finance from a consortium led by Credit Suisse,
Bank of America, Barclays, BNP Paribas, Citibank, Fortis, HSBC,
ING and JPMorgan Chase.
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Super premium beer from
Carlsberg |
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Carlsberg set to launch a beer costing almost $400 a bottle
to challenge luxury wines in the gourmet restaurant market. The
37.5 centiliter, or 12.7 ounce, bottle called Vintage No. 1 will
cost 2,008 Danish kroner, based on the year of its introduction.
The beer contains hints of prune, caramel, vanilla and oak
tree from the French and Swedish wooden casks in which it is
stored.
The Super-mega deal is a truly transformational transaction.
‘In a single step Carlsberg created the world’s fastest growing
global brewer" and "It gives Heineken undisputed leadership in
Europe and creates significant opportunities in profitable
markets to grow the premium Heineken brand" opines Dr. Mohan
Krishna.
The deal values S&N at around £1bn more than the consortium’s
original offer back in October. Some analysts have praised S&N’s
refusal to negotiate on previous offers as a successful strategy
to drive up the asking price.
The deal was through as both companies were very much
interested in cutting costs on the background of higher prices
for malting barley and aluminum cans. Carlsberg and Heineken’s
deal also puts pressure on other rival companies such as Molson
Coors and Foster’s to adopt the same strategy!
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