Interbrew wriggles, but will it make a difference?

Dixons/Kingfisher; ONdigital solution
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The Independent Online

Those plucky little Belgians don't know when to give up, do they? Interbrew must have paid out a king's ransom and more in legal, investment banking and lobbying fees attempting to persuade the powers that be that it should be allowed to hang on to the best part of Bass and Whitbread – Goldman Sachs is the latest big gun to be enjoined in the attempt – and finally yesterday it looked as though it might be making headway.

The consultation document published by the Office of Fair Trading certainly had the whiff of compromise about it, with a couple of new, rather less oppressive remedies added to the two originally examined in the Competition Commission report. The big question: is this just the OFT bending over backwards to be scrupulously fair in its re-examination of the case after the caning the Competition Commission received for unfair procedure? Or does it represent a real glimmer of hope for Interbrew?

Unfortunately for the Belgian brewer, it is more likely to be the former than the latter. Having now explained to the competition authorities how a disposal of Whitbread might be accomplished with the Stella Artois brand sufficiently ring fenced to prevent Interbrew interfering – the issue on which the Competition Commission fell down – Interbrew has decided it doesn't want to do it anyway. Too much money and time has already been invested in integrating Whitbread, and in any case, the Stella Artois brand is so central to the Interbrew strategy that it cannot be abandoned.

On the other hand, re-opening the case has allowed a tactical retreat for Interbrew that opens up alternative remedies. Interbrew told the Competition Commission that breaking up Bass or Whitbread was too complicated and therefore out of the question. But now, lo and behold, it's not so complicated after all. Hence the ingenious "International Brewer" remedy, which seems to have been Goldman's main contribution to this regulatory swill.

Under this proposal, Interbrew would assemble a package of brands and assets from Bass and Whitbread that would be sold to a rival international brewer to create a "third force" in the British beer market. Unfortunately, it only really works if these assets are bought by either Heineken or Carlsberg-Tetley, and the Office of Fair Trading questions whether it would in any case correct the competition problem.

The "Carling Brewers" remedy, under which Interbrew would keep Bass in Scotland and Northern Ireland but sell the rest, is not going to satisfy the publicans, even if they could work out precisely what's being proposed, which even to a teetotal head is far from clear. This leads us in a round about way back to the original Competition Commission recommendation – that Interbrew be forced to sell Bass.

This is still the best and least complicated solution. Interbrew can wriggle and squirm all it likes, but the fact of the matter is that it was either stupid, ill advised or both when it in short order bought first Whitbread and then Bass thinking that in a market as politically charged and investigated as the beerage it could get away with owning both. It was an expensive mistake, and by refusing to admit he was wrong, Interbrew's chief executive, Hugo Powell, is only making it more expensive still.

Dixons/Kingfisher

Could Dixon play a part in the ultimate dismantling of the Kingfisher retail empire? Dixons has long been interested in Darty, Kingfisher's French electricals business and said so explicitly yesterday. John Clare, Dixons' chief executive also said that Dixons is "observing Kingfisher with interest"

Could another bid battle be on the way? These two have some "form", of course, having launched bids for each other in the heady 1980s. Dixons opened the hostilities with a bid for Kingfisher in 1986 when it was called plain old Woolies. Kingfisher then turned the tables a few years later by launching its own bid for Dixons. With Sir Stanley Kalms due to step down as Dixons' chairman next year, what more fitting finale than a break-up bid for his old adversary?

It is not as farfetched as it sounds. There would be a queue of buyers for B&Q, which is the UK market leader and streets ahead of its rivals. Home Depot, the US giant, would be Sir Stanley's first port of call. Comet would also have to be sold because of its market overlap with Dixons but is the kind of business that might interest financial buyers. The problem would be the other "bits" as Mr Clare describes them, such as the joint venture with Castorama, the French DIY business.

But where there's a will there's a way, and where there's a fee there's an investment banker determined to find a way. There may never be a better time to strike. Kingfisher shares are close to a four year low having been pummelled by a series of veiled profits warnings. And investors confidence in the management is at rock bottom after the on-off demerger farce of Woolworths and the equally farcical "will he stay or will he go" saga of Gerald Corbett. If there was a bid for Kingfisher it is hard to see shareholders backing Sir Geoff Mulcahy, Kingfisher's chief executive, after the events of the past year.

Maybe the prospect of being stalked by his old adversary will sting the great mumbler into action. If it doesn't it is hard to see what will.

ONdigital solution

That the two main ITV companies, Granada and Carlton, have a big, big problem with ONdigital is well known. That they don't have a clue what to do about it is also obvious after Charles Allen's gloriously embarrassing letter to the Prime Minister, in which he whined that Granada might get taken over by Johnnie foreigner if the Government didn't do more to help ONdigital and ensure the creation of a single ITV.

Both Mr Allen and his opposite number at Carlton, Michael Green, know they are going to have to do something soon or they'll both be out. Merely protesting that eventually ONdigital will come right is not sufficient, nor is next week's rebranding of ONdigital as ITV Digital likely to be seen as any more than cosmetic.

If ITV could get out without a big write off, it surely would, notwithstanding the public policy and political capital that's tied up in the project. But who these days would buy? ONdigital would plainly make sense as part of one of the big cable companies, which could fold it into existing marketing, billing and backroom operations, thus significantly cutting costs.

But up to their necks in debt, neither NTL or Telewest have the money to buy. The same goes for BT Retail. ONdigital would make a great fit, and would have obvious appeal to the new chairman, Sir Christopher Bland, with his broadcasting background. But financially he would find it as hard to justify as the cable companies. Bundling Ondigital with BT's dominant position among domestic telephone subscribers would also raise competition issues.

And then there's BSkyB waiting, cat-like, in the wings. Sky was part of the original ITV bid for the digital terrestrial licence, but was eventually forced out of the consortium by the Independent Television Commission. The competition issues would seem to be even greater than with BT Retail. But ITV's need is desperate. Don't discount Sky as part of an industry wide solution.

j.warner@independent.co.uk

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