S&N details case for acquiring Russian venture

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The Independent Online

Scottish & Newcastle stepped up its fight against Carlsberg yesterday by unveiling details of its plan to transform itself into "one of the most attractive international beverages businesses" by wresting control of BBH, the highly profitable Russian joint venture, from its Danish suitor.

In the latest in a string of harshly worded attacks on Carlsberg, the brewer of Newcastle Brown Ale and Kronenbourg 1664 provided a point-by-point explanation of the claim it filed to a Swedish tribunal which alleges that its suitor breached the agreement under which the two companies govern the prized Russian brewer.

The bidders reacted by branding S&N's tactics "frivolous". They said that they would ask the arbiter to dismiss the case outright because it is "totally unfounded and [constituted] a misuse of the arbitration process."

S&N says that by launching its unsolicited break-up bid with partner Heineken in October, Carlsberg violated the BBH deal and should now be forced to sell it its stake.

S&N said yesterday that gaining control of the business, which is growing much faster than S&N's UK and European units, would transform its profile and lead to a re-rating of its shares due to its greater exposure to one of the biggest emerging markets. It also said that taking control of the business would allow it to extract up to 100m in synergies through consolidating operations such as packaging and procurement.

Yet analysts expressed scepticism at several of S&N's arguments. Merrill Lynch said that the 100m in forecast synergies was "not terribly convincing". S&N also detailed improved profitability figures based on paying just 3.2bn to take control of Carlsberg's 50 per cent stake of BBH. That number, however, is the value implied by the 750p-per-share Heineken-Carlsberg bid for all of S&N including its equal 50 per cent BBH holding that it has repeatedly and adamantly dismissed as low-ball. "They say this undervalues the business, but then they want to get it at that price," said Marcel Hooijmaijers, an analyst at Landsbanki Kepler in Amsterdam. He said that S&N would have to pay at least 4.4bn for the unit.

S&N said it would finance a BBH purchase by bringing in a minority investor to take up to 25 per cent, while raising debt on the market and selling non-core businesses to pay for the rest.

Heineken and Carlberg have until 21 January, the put-up or shut-up deadline imposed by the Takeover Panel, to launch a formal offer or walk away.

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