Allied forced to drop Carlsberg price by 33%

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The Independent Online
Allied Domecq had to drop the asking price for its Carlsberg-Tetley brewing business by 33 per cent to secure a takeover agreement with Bass, a source close to the negotiations said yesterday.

The source said that Allied originally put the business up for sale tagged with an asking price of pounds 300m. It is now widely expected that the deal will be pitched at pounds 200m and will finally be sealed late this week with Bass.

"Allied is having to pay a heavy price to correct its mistake of a couple of years ago," one analyst said. Allied pooled its brewing interest with Carlsberg of Denmark in the early 1990s, but has never been able to extract the expected benefits from the venture, according to company insiders, due to vast cultural differences with the Danes.

Bass, it is understood, would not entertain Allied's pounds 300m value because of the regulatory risks involved. To avoid a referral to the Monopolies and Mergers Commission, the Department of Trade and Industry is likely to force Bass to agree to undertakings probably involving the sale of a couple of hundred pubs and some beer brands.

Although opponents of the deal believe a Bass takeover of Carlsberg-Tetley would concentrate too much power in the hands of just two companies - Bass and Scottish Courage - there is mounting speculation that the DTI has been persuaded that the springing up of powerful independent pub chains has shifted the industry's power away from the brewers.

The pub owners are also consolidating and it is believed that the market could soon be dominated by a handful of national chains with the clout to demand big discounts. That might be enough to secure a relatively easy regulatory passage for the takeover.

Full details of the deal have yet to be disclosed, and lawyers are busily applying the final touches to a complex takeover that involves around 70 separate agreements.

These involve numerous supply deals on Carlsberg-Tetley's beer brands - from Carlsberg and Skol lagers to Tetley bitter - and securing the future of Allied's Danish brewing partner in the UK.

Carlsberg, according to industry speculation, is set to end up with a 20 per cent equity stake in Bass Brewers, the brewing arm of Bass which also owns the international Holiday Inn hotel chain.

Beside lowering the asking price, analysts expect Allied to make a pounds 300m write-off for withdrawing from brewing.

Once the deal is consummated, Bass will regain its position as the largest brewer in the UK, after having been toppled from pole position last year when Scottish & Newcastle bought Courage from Foster's of Australia. Bass and S&N will hold sway over almost 70 per cent of the UK's beer production.

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