S&N, the Newcastle Brown and McEwan's beer group, has signed a deal giving it exclusive negotiating rights with Foster's Brewing, the Australian lager business that owns the UK-based Courage.
But exclusivity was granted only after two other serious potential bidders dropped out - Whitbread and, more surprisingly, Anheuser-Busch, the American Budweiser group that ranks as the world's biggest brewer. This is the first time that Anheuser is known to have shown interest in becoming directly involved in the UK beer market.
The two groups are understood to have been deterred by four main sticking points:
An insistence by Foster's that the new owner continues to pay royalties for the use of the Foster's brand name in the UK. That in itself might have been acceptable, but the Australians are believed to want a high minimum annual royalty. Last week, S&N executives were trying to reduce this minimum, and were holding similar talks with Courage's other licensors - Holsten Pils, Kronenberg, Miller and Budweiser.
A deferred payment demanded by Foster's of £180m before tax relief for what is described as "super profit" in the supply contract with IEL, the 306-strong pub chain that S&N and British Land jointly bought on Friday for £198m. The pubs were formerly owned by Grand Metropolitan and Foster's.
A potential £90m required to top up the Courage pension fund.
A three- month deadline on any claims for a partial refund of the purchase price if unexpected skeletons are discovered at Courage.
In addition, there is the regulatory risk. The UK brewing industry is currently in the throes of yet another inquiry, this time by the Office of Fair Trading. Courage and S&N combined would have a 32 per cent share of the UK beer market, and the authorities are believed to oppose any deal giving one group more than 25 per cent.
S&N has been trying to get the OFT's agreement to wave through the Courage takeover on a promise to sell enough assets to come under the 25 per cent threshold. One idea is to sell the Courage brewery at Mortlake, on the Thames near the Boat Race finish.
However, the OFT has apparently been unwilling to give any clear signals, thus increasing the uncertainty. If it were to consign the deal to a Monopolies & Mergers Commission investigation, rivals could use that time to prepare defensive tactics.
Foster's and S&N were unwilling to comment on the talks.Reuse content