As S&N unveiled proposals for a pounds 354m, two-stage rights issue, critics forecast huge job losses and an MP called for an urgent meeting with Michael Heseltine, president of the Board of Trade.
S&N is paying pounds 425m to Foster's, the Australian brewer, for its Courage subsidiary, but a share option package included in the deal is likely to put the value of the takeover beyond pounds 500m. The acquisition joins brands such as Foster's lager, Courage Best, and Holsten with S&N's McEwan's Export and Newcastle Brown, giving annual sales of pounds 2.2bn.
S&N said the deal gave it a market share of 25 per cent, against Bass's 23 per cent, but analysts put the real figure at nearer 30 per cent - a dominance likely to trigger an inquiry by the Monopolies and Mergers Commission.
The deal involves:
n S&N raising pounds 354m in a one-for-seven rights issue over two stages, equivalent to 475p a share. The first, at 190p a share, will raise pounds 138m, and the second, at 285p a share, is worth pounds 216m.
n S&N will have rights for an unlimited period to brew, package and market the Foster's brands in the UK, the Republic of Ireland and Continental Europe;
n S&N will supply Foster's with all the beer it needs for its Inntrepreneur joint venture with Grand Metropolitan until 28 March 1998. It is also buying an interest in Budweiser via a share of a joint venture with Anheuser- Busch. The deal excludes Foster's 4,500-strong pubs chain;
n On top of pounds 425m cash, S&N will pay Foster's in either 1999 or 2000 a sum equal to the increase in value of 10 million S&N ordinary shares over 537p per share, either in S&N shares or in cash. S&N will take on Courage's pounds 48m pension shortfall.
Brian Stewart, S&N's chief executive, said some rationalisation was inevitable, though he could not give figures. However, one of the brewing group's main rivals estimated the merger could result in up to 4,000 redundancies.
Courage is the second-biggest beer producer in the UK, employing around 4,900. It has four breweries at Tadcaster and Halifax in the North, Bristol and Reading. S&N employs 4,500 in its brewing side, and both companies have suffered from the severe over-capacity in the industry.
One analyst said that S&N may be planning the closure of a Courage brewery and the ending of some brands to escape an MMC reference.
Mr Stewart said: "The deal is an excellent north-south fit that does not give us dominance in one particular area. There is also a limited tied estate component to the deal.
"It will enhance choice rather than restrict it," he added.
He did not disagree with analysts' estimates that restructuring costs could be between pounds 50m and pounds 100m.
The Campaign for Real Ale said the deal would mean higher prices and less choice for drinkers. Steve Cox, campaigns manager, said: "We want an immediate reference to the MMC. This merger is grossly anti-competitive."
David Wilshire, the Tory MP whose constituency includes the Courage head office in Staines, Middlesex, said he would seek a meeting with Mr Heseltine to press for an early decision on whether the merger should go ahead. "We need a very quick decision to clear up the uncertainty for the sake of people knowing what their future is."Reuse content