S&N saga rolls on

If the fate of Scottish & Newcastle, Britain’s biggest brewer, had not been sealed by Carlsberg and Heineken raising the price of their planned joint bid for the third time, it almost certainly has been by the stock market crash this week.

When rumours of a bid for S&N first started to circulate in spring last year, the company’s shares stood at about £5.50p each.  Providing the bid is launched by tomorrow’s deadline (there are rumours about problems with the due diligence) it will be at no less than £8.

True, that reflects some of the undoubted benefits Carlsberg will reap from full ownership of BBH, the joint venture with S&N that dominates the rapidly growing Russian market, but the £2.50 per share differential is likely to tempt the institutional investors who will decide the outcome. The thought of S&N’s share price being stripped of its takeover premium will focus minds. Pension funds and investment houses have been ravaged in the past few days; they will want to grab the cash (and possibly reinvest in inherently cheap equities). They won’t hang on in the hope of jam tomorrow from S&N.

Of course, it is always possible that a rival suitor could appear before the deal is finally done, but the credit crunch will make it that much more difficult to raise the cash – and there are rumours that Carlsberg is having to push its banks to finance the enhanced deal.

That throws up an interesting sidelight. Now that money is much more difficult to borrow, how much will suitors be prepared to offer for Vin & Sprit, the producer of Absolut vodka being sold off by the Swedish government? Would-be bidders will be calculating the potential returns on capital, which are lower than six months ago. In terms of maximising the price, the Swedish government may have moved too late.

© Ron Emler, db 23/01/08