Carlsberg shake-up fuels S&N takeover bid rumour

Shares in Foster’s brewer Scottish & Newcastle soared today amid market speculation over bid interest from Danish rival Carlsberg.

The fever, which left shares 6% higher, was fuelled after Carlsberg announced a share shake-up which would give the firm more freedom to create funds for acquisitions.

The move immediately turned attention to S&N, which has been in the spotlight after also being linked with a £9bn (€13.2bn) takeover bid from rivals Diageo and SABMiller on Monday.

Carlsberg’s founding trust, the Carlsberg Foundation, has applied to the Danish Government to reduce its share holding in the Danish brewer from 51% to a minimum 25%, although it would still control 51% of votes.

Carlsberg chairman Povl Krogsgaard-Larsen hinted that the company was on the acquisition trail through the move to increase its capital base, which could reportedly net as much as 45 billion Danish krone (€6bn).

He said: “If Carlsberg is to remain in a position to take part in the consolidation process, it will be necessary to create a possibility for the company to substantially increase its capital base.”

Graham Neale, head of equities at Killik & Co, said that S&N, which also makes Strongbow and John Smith’s, was “likely to be broken up”.

He added that a possible move for Carlsberg could also be to buy out S&N from its 50/50 joint venture with the company, Baltic Beverages Holding, which sells beer in Russia, the Ukraine and Kazakhstan.

In a trading update yesterday, S&N said that BBH had benefited from an exceptionally mild Russian winter in the first quarter and its performance was set to beat expectations. BBH, which has 18 breweries, a share of more than 36% of the Russian beer market and operating profit grew by 39% last year.

But other analysts poured cold water on the bid talk surrounding S&N, with July’s smoking ban set to hit sales despite the firm’s big brands outperforming the market.

Shore Capital analyst Andy Blain pointed out the firm had “a high exposure to the mature and declining Western European beer market”.