Bass bid for Carlsberg-Tetley referred to the MMC

The attempt by Bass to recover its position as Britain's biggest brewer was put on ice yesterday after its proposed acquisition of Carlsberg- Tetley was referred to the Monopolies and Mergers Commission. The MMC has until March to investigate the pounds 200m deal, which would see Bass leapfrog Scottish & Newcastle into the beerage's top slot.

A referral had been widely anticipated in the City following an apparent tightening of competition at the Department of Trade and Industry. Two weeks ago, the proposed merger of P&O's and Stena's cross-Channel ferry services was unexpectedly sent to the MMC.

Bass is understood to have been unwilling to accept a compromise offer from the OFT, considering its proposed concessions too onerous. Industry observers had speculated that Bass might be forced to sell up to 1,000 tenanted pubs in order to escape a referral.

Bass has already acquired 50 per cent of the Carlsberg-Tetley joint venture from Allied Domecq and was proposing to buy the other half from Carlsberg. If approved, the deal would give Bass up to 38 per cent of the UK brewing market, ahead of Scottish & Newcastle's share of 30 per cent which was boosted by last year's acquisition of Courage from Foster's of Australia.

In a complex deal, Bass has retained a get-out clause if the deal is blocked or if any regulatory conditions prove unacceptable. It has a put option which would force Carlsberg to buy most of the share of the venture bought from Allied. Although Bass would suffer a financial penalty by pulling out of the deal at this late stage, it is understood to be prepared to do so unless it can merge on its own terms.

Yesterday's referral was applauded by unions and consumer groups alike. The Transport and General Workers union welcomed the decision to refer the takeover to the MMC, saying there were important issues at stake.

Brian Revell, national secretary for the drinks industry, said: "Our main concern is that if the takeover is allowed to proceed, at least 2,000 jobs are likely to be lost. However, we acknowledge that the situation is complicated and there is a possibility of a lesser number of jobs being lost if the takeover does not go ahead due to the competitive pressures in the industry."

Carlsberg-Tetley is seen as the weakest player in an increasingly concentrated brewing market and there are concerns about its continuing ability to compete with Bass, S&N and Whitbread if it is not absorbed into Bass.

Camra, the Campaign for Real Ale, also warmly welcomed the decision. "This merger would create the largest brewer in British history. The new enlarged Bass and Scottish Courage, the current number one, would have 70 per cent of the beer market between them.

"The takeover has severe implications for consumer choice. It is likely to lead to widespread brewery closures and job losses, particularly in distribution," said campaigns manager Stephen Cox.

City analysts said the move was unsurprising given the large share of the beer market Bass would have gained from the deal. "Considering the combined entity would have 38 per cent of the brewing market, a referral was always considered likely", said Colin Humphreys at Panmure Gordon.

Teather & Greenwood's Nigel Popham commented that if Labour wins a general election before the deal is cleared, the change of government could jeopardise the merger.

Comment, page 17

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