Scottish & Newcastle (S&N), Britain’s biggest brewer, is preparing to examine “all options” as it braces itself to ward off an impending £9 billion break-up bid from Heineken and Carlsberg.

The company, which has dismissed the mooted approach as “unsolicited and unwelcome”, will consider approaching a white knight bidder or selling all or part of the jewel in its crown - its 50 per cent stake in Baltic Beverages Holding (BBH).

The brewer is also threatening to invoke the so-called “shotgun clause” that governs its holding in BBH, which it co-owns with Carlsberg in a 50-50 joint venture.

S&N could use the clause to make an offer to buy out Carlsberg’s half of the business, although the Danish brewer would then have a period of time in which to match that offer. If it did so, S&N would have to sell its own holding.

A source close to the S&N camp said that John Dunsmore, who assumes the reins as chief executive on November 1, would be heading the bid defence in tandem with the group’s advisers, Deutsche bank and UBS.

However, the source pointed out that the group had yet to receive anything other than a “cack-handed nonapproach”, adding: “There’s no bid on the table. Where’s the beef?”

A spokesman for the 258-year-old company claimed it was highly likely a foreign owner would relocate its corporate headquarters out of the UK, putting up to 1,000 jobs at risk and jeopardise businesses that supply it.

S&N suggested that losing its independence could also undermine the Government’s efforts to encourage responsible drinking. “There are alcohol questions,” the spokesman said. “A major part of the campaign requires the constructive support and engagement of a locally headquartered business. Do you think that same constructive support would come if S&N is run from Amsterdam?”

Heineken and Carlsberg confirmed on Wednesday that they were considering forming a consortium to make a joint approach after a sharp rise in the S&N share price. It is understood that they are putting the finishing touches to a bid worth between 720p and 750p, and are hoping to be able to announce it next week.

Shares of S&N added 1½p to 757½p, valuing the company at about £7.16 billion, or more than £9 billion including debt.

But S&N, which is furious at Carlsberg’s actions, is expected to reject out of hand any offer of less than 800p. One well-placed source said: “The bid defence will be all about value. People are grossly undervaluing the potential of BBH and Western Europe is at a low ebb due to factors like the weather.

“This so-called bid is nothing more than Carlsberg trying to seize BBH on the cheap. I would have thought that anything under 800p will have a chance in hell of getting through.”

A source close to the consortium admitted that the two European brewers were angry that whispers of a bid had leaked into the market forcing them to issue a statement prematurely.

However, the source insisted they wanted to “sit down and work with S&N to come up with a friendly recommended transaction”.

Carlsberg, which would take over S&N’s interests in France, Greece and its BBH stake, including Russia’s Baltika business, is expected to pay for its portion through a rights issue to ensure that it retains its investment grade status.

Its Dutch partner, which would acquire the Edinburgh-based group’s operations in the UK, Finland and Portugal, would pay its share by taking out new debt facilities.

S&N sources cautioned that most of the disparate businesses that make up BBH had local minority partners. “Take Baltika. It is a quoted company with 10 per cent held by minorities. It’s all very well coming in and saying you want to buy 100 per cent. You ignore the minorities at your peril.”

Money on tap
S&N’s performance 2006

UK

Revenue £1.86bn
Operating profit £206m
International revenue £1.57bn
Operating profit £178m BBH (50% share)
Revenue £724m
Operating profit £160m

Group

Revenue £4.16bn
Operating profit £535m

Source: S&N annual report

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