S&N deal for Courage due this week

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The Independent Online
Scottish & Newcastle is looking at several "innovative" methods of financing as well as a straightforward rights issue to buy Courage, the brewer, in a £500m deal expected to be announced this week.

The long-awaited purchase from Foster's, the Australian brewer, will turn the group into Britain's biggest brewer.

With gearing already standing at 41 per cent in October, S&N may not be keen to take further substantial debt onto its balance sheet to acquire Courage.

This has led to speculation that it is poised to launch a onefor-four rights issue, which would probably raise all the funds required but might run into opposition from shareholders.

It is just a year and a half since S&N raised £405m from a rights issue to back the £700m purchase of Chef & Brewer from Grand Metropolitan.

The size of any new cash-raising could be reduced by asset sales, which would both cut the cost of the deal and help to meet any regulatory concerns.

One estimate puts S&N's market share with Courage at close to the 25 per cent level that would threaten an automatic investigation by the Monopolies and Mergers Commission.

One option to which consideration is being given is thought to be a sale of Courage's Mortlake brewery in London to Anheuser-Busch, giving the owner of the American Budweiser brand a strong platform for an assault on Europe.

But it was being stressed over the weekend that Courage's future is by no means tied up yet. The sale talks, which have been going on since last October, have been complicated by the brewer's Australian ownership and the number of brands involved.

Whitbread had been one of the front-runners to buy Courage, but dropped out earlier this month apparently because of difficulties with Heineken over Holsten, one of Courage's brands. Whitbread already markets Heineken in the UK and it is said that the Dutch brewer was unhappy that the Courage deal would have resulted in it marketing one of its main rival's brands.

If S&N clinches the deal, it will help to consolidate its position in the south of England, first established with the Chef & Brewer acquisition, which brought it 1,650 pubs, mostly in the South. As well as Mortlake, Courage would bring two other breweries in the South - at Reading and Bristol - along with two in the North, at Tadcaster, the home of John Smith's, and Halifax.