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New Carlsberg CEO fuels S&N rumours

City analysts believe it is almost inevitable that Carlsberg will bid for Scottish & Newcastle. They believe the onus is now on the Danish brewer to explain why it should not launch a takeover approach because the deal makes such considerable logic and no convincing denials of the desire for a link have been forthcoming from Copenhagen, especially following the appointment of new chief executive, Jorgen Buhl Rasmussen, on Monday.

Jorgen Buhl Rasmussen has previously been running Carlsberg’s Eastern European operations. He is reported to have said: “There would be many advantages in a merger with S&N, and the most important is the mutually-owned BBH… an additional advantage would exist if we had a single owner to BBH.”

Already this year, the Carlsberg Foundation, the charitable body that controls the brewer, has reduced its shareholding to 25% of the group (but retained voting control) in order to raise cash and give the board scope to make acquisitions. The group’s chairman, Povl Krogsgaard-Larsen, has said that it has a war chest of more than £6bn available. That would be sufficient to offer S&N’s shareholders an enticing premium to the £5.4bn at which the Edinburgh-based group is valued on the stock market.

The most substantial argument in favour of a deal, however, is that both companies are equal partners in the highly profitable Russian joint venture, Baltic Beverage Holdings, which makes about a third of Carlsberg’s profits and a marginally smaller proportion of S&N’s. That makes it difficult for either partner to take over or join forces with a rival without causing substantial difficulties. In addition, the brewers’ other global activities could be unified profitably.
In a further development, Blackstone, the private equity group, has held talks recently with both Carlsberg and Scottish & Newcastle. Analysts believe it is interested in S&N’s European distribution network, which would open new markets to Orangina, the soft drinks enterprise it owns jointly with Lion Capital.

Ron Emler, 05/09/07

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