Is S&N over-confident about Courage bid?

Ostensibly, Scottish & Newcastle was there to discuss a buoyant set of profit figures. In the end, however, Brian Stewart, S&N's chief executive, just couldn't help talking yesterday mainly about the group's imminent Courage takeover - or rather what it hopes is its imminent takeover. Michael Heseltine, President of the Board of Trade, is set to pronounce on the issue by the end of the week and the market is still very much in "will he, won't he" mode. Mr Stewart was naturally "quietly optimistic" as he announced a near 20 per cent rise in profits, but is he right to be? S&N was told to expect a free ride in "confidential" pre-bid guidance from the Office of Fair Trading; it is rare for civil servants to change their minds.

It wasn't until quite recently that the rest of the brewing industry realised the strength of S&N's position. Most had assumed that the deal would be referred to the Monopolies and Mergers Commission, like every other brewing aquisition before it. Since it became generally appreciated that there was a real danger of the deal sailing through without a single condition attached, a barrage of public and private lobbying has taken place. The backlash could yet scupper S&N, whose comments yesterday seemed as much directed at Mr Heseltine as the City.

Thus we heard - for the umpteenth time - that the deal would give S&N no more than 25 per cent of the national beer market, barely more than Bass and considerably lower than the 30 per cent talked about by competitors. It was, moreover, the perfect North-South fit.There were also a few nice little touches aimed specifically at Mr Heseltine, that great believer in the creation of "national champions" for the storming of export markets. Sales of S&N beers are booming abroad, according to Mr Stewart, with international business now representing 5 per cent of beer profits after an 11 per cent rise last year. Newcastle Brown is leading the way, with North American topers particularly keen on the brew.

But it is the European market that Mr Stewart has really got his eye on. With over 30 per cent of the beer market expected to be in the take- home trade by the end of the decade, he suggests that the likes of S&N must have a sufficient range of brands to take on continental brewers, such as the mighty Heineken, in the fight to win supermarket shelf space. S&N's chances of selling in Verona will be much improved, apparently, once its range of brands is enhanced by the Courage takeover. Believe it if you will. Mr Heseltine certainly does. Leadership contest allowing, we'll know within the next few days whether he believes it enough to overcome valid concerns about jobs and reduced competition.

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