Whitbread pulls out

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The Independent Online
Whitbread's negotiations to buy Courage, Britain's second-largest brewer, from its Australian owner, Foster's Brewing, have broken down irretrievably. Scottish & Newcastle is understood to be still holding talks to buy Courage, which, analysts say, is probably worth more than £500m.

The decision by Whitbread to exit from the two-horse race was apparently taken late on Tuesday night, and the directors of Foster's were informed early on Wednesday morning in Australia. Signs that the two sides were drifting apart started to appear a fortnight ago, when discussions were stalled by wrangling over the control of beer brands, particularly Foster's lager which is brewed by Courage in Britain.

A banking source in Australia said yesterday that the chances of Foster's and Whitbread opening fresh talks "would be like getting a sheep to shear its own back".

The differences between the two, the source added, were "as wide as the outback".

Whitbread declined to comment. However, the feedback from Australia was that Foster's thought that Whitbread was driving too hard a bargain by insisting on several conditions being built into the deal. The UK company had, it is understood, matched Scottish & Newcastle on price but had become concerned about several unresolved issues involving Courage in the UK.

One of the main issues is the controversial Inntrepreneur pub company, which is jointly owned by Courage and Grand Metropolitan, the international food and drinks group.

Inntrepreneur was the catalyst for the recent inquiry into wholesale beer prices launched by the Office of Fair Trading. Whitbread, the source added, was fearful of exposing itself to the possibility of adverse findings by the OFT with regards to Inntrepreneur.

There was also said to be a problem over negotiations on the long-term viability of some of Courage's beer supply contracts, particularly the exclusive arrangement with 4,350 Inntrepreneur pubs that expires in three years.

Additionally, Courage's exclusive supply agreement with more than 1,500 Chef & Brewer pubs, which were bought last year by Scottish & Newcastle from Grand Metropolitan, runs only until the end of this month.

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