Labatt finds a Belgian white knight

BY JOHN SHEPHERD

Interbrew, the Belgian brewer best known for producing Stella Artois, yesterday launched a C$4bn (pounds 1.8bn) white knight takeover bid for John Labatt, the Canadian company under siege from a C$3.4bn offer from Onex, a leveraged buyout firm.

The Belgian company is offering C$26.25 in cash and C$2.25 in interest- bearing notes for each Labatt share. Onex had offered C$24 a share.

Labatt has openly sought a white knight to counter the bid from Onex, which wanted to break up the group.

Besides brewing, Labatt has a large entertainments business and owns the Toronto Blue Jays baseball team.

The deal will propel Interbrew's standing in the world rankings by 14 places to third.

Combined annual production of the two companies will amount to more than 51 million hectolitres of beer, which is several million less than Heineken - and less than half the output of Anheuser Busch, maker of Budweiser and the clear world leader.

The combined group would also claim a 44.4 per cent share of the Canadian market, 45 per cent in Mexico and 58 per cent in Belgium.

Labatt also has a 22 per cent stake in Femsa Cerveza, the second-largest brewer in Mexico and the 14th-biggest in the world.

Interbrew's intervention caught brewing analysts by surprise. Many had tipped Carlsberg of Denmark as a suitor for Labatt.

The Belgian company's long-term aspirations to join the top flight of world brewing, however, were made clear at the turn of the decade when Guinness trumped its moves to buy Cruzcampo of Spain.

Hans Meerloo, chief executive of Interbrew, said yesterday: "Labatt is a highly attractive company with strong market positions and a growth strategy which complements our own."

The deal has several implications for the UK brewing market, which is in an advanced state of consolidation.

Stella Artois is brewed under licence in the UK by Whitbread while Labatt's beers are produced under similar agreements through Carlsberg-Tetley, the joint brewing venture which is owned by Carlsberg and Allied Domecq.

Carlsberg, analysts say, will be far from happy producing products for one of its main rivals in Europe.

Interbrew's deal will also reinforce Scottish & Newcastle's arguments to help its takeover of Courage escape a reference to the Monopolies and Mergers Commission.

S&N has said that consolidation at the top of the UK brewing industry is necessary, not only because of the problems in the home market, but because of the growing size of European competitors.

1 Anheuser Busch

2 Heineken

3 Interbrew/Labatt

4 Miller Brewing

5 Kirin

6 Fosters Brewing

7 South African

Breweries

8 Danone Group

9 Carlsberg

10 Brahma