Onex set to ditch bid for Labatt

JOHN SHEPHERD

The battle for control for John Labatt, the second-largest brewer in Canada, will almost certainly be settled today, with the buyout firm Onex set to announce that it will not increase its C$3.4bn (pounds 1.5bn) offer.

Brewing industry observers in Canada said yesterday that last week's C$4bn "white knight" takeover bid for Labatt by Interbrew, the Belgian brewer of Stella Artois, was above the limit Onex was prepared to pay.

There is also a consensus of opinion among Canadian drinks analysts that Onex's withdrawal will completely clear the path for Interbrew's deal. While Labatt courted several other potential suitors to fend off Onex's unwanted attentions, it is thought that rival bidders have also balked at Interbrew's offer of C$28.50 a share.

A long queue of parties interested in Labatt's broadcast, sports and entertainments business is forming, however. Labatt has thrown its books open to inspection, and the first bits to be sold are likely to be the broadcast businesses. The future of Labatt's ownership of the Toronto Blue Jays baseball team has yet to be decided.

A spokesman for Labatt said that it would no longer seek an alternative bid for the brewing side in the belief that Interbrew's offer was good value for shareholders who have suffered from a stagnant share price for several months. "We think the chances of another bidder wanting all the assets is pretty remote," he added.

The combined force of Interbrew and Labatt will be the third-biggest in the world, ranking closely behind Heineken, the Dutch brewer, but a long way adrift of Anheuser Bush, the giant US combine best known for Budweiser. Anheuser sells more than 105 million hectolitres of beer annually, more than twice Heineken's total sales.

This marks another step in consolidation in world brewing, a process starting to rumble in the UK with Scottish & Newcastle's recently agreed pounds 435m takeover of Courage, which is yet to be cleared.

Beer sales volumes in the main markets in the US, the UK and across Europe have been in steady decline for several years, and the outlook remains uncertain.

The world's big brewers are now focusing on promoting premium brands, and trading deals, particularly agreements for brewing competitors' products under licence, are being struck at a considerable rate.

Labatt's main brands - Labatt lager, Labatt Ice lager and Rolling Rock - are, for instance, brewed in the UK mainly by Carlsberg-Tetley, the joint venture owned by Allied Domecq and Carlsberg, the Danish company. In Canada, Labatt itself brews Budweiser under licence.

Interbrew's move has sparked speculation that Carlsberg, which fosters ambitions to improve its standing of ninth in the world league, may try to buy Allied Domecq out of its UK partnership. Allied has made little secret that brewing does not conform to its long-term strategy, and has held talks with Whitbread, which had also bid for Courage, about selling its stake.

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