CBC - If you ask me... S&N. Carlsberg and Heineken
I doubt that it is of the Dutch variety, but John Dunsmore, Sir Brian Stewart and the S&N board have certainly displayed courage over the last few months as they have held firm on calls to accept the takeover approach from Carlsberg and Heineken.
S&N has long been viewed as a company in need of a suitor, and the City and investors alike have been awaiting such an approach for years. Given the subdued economic climate, the wholly unspectacular nature of Western European beer markets and the rising cost of raw materials, it would have been all too understandable if S&N had opened the door to its negotiating room the moment Carlsberg and Heineken made public their interest.
But the door remained firmly shut and what followed was a fascinating game of brinkmanship. Many - perhaps even this commentator - will have to hold their hands up and say they called this one wrong. My gut feeling was that S&N was playing a dangerous game. Given the rhetoric that was flying at the time, it seemed that the board had allowed the anger they personally felt at long-time partner Carlsberg, for going behind its back to plot this takeover, to get in the way of a potentially compelling takeover for its shareholders.
Carlsberg's comments that S&N shareholders should choose between "definite value today or a long period of uncertainty", made some sense. One couldn't help but be reminded of that other great UK business institution Sainsbury's, which last year saw its share price fall sharply after it procrastinated too long over a bid from a Middle Eastern private equity group, which, frustrated, ended up walking away altogether.
But as Carlsberg and Heineken announced the raised bid of 800p a share late last week, Dunsmore, Stewart et al stood vindicated for how they have played this so far. In such an environment and under such pressure, eking out an extra 50p a share from the original offer is quite some achievement. The final 20p is particularly impressive, given the tough stance Carlsberg had taken after raising the bid to 780p. S&N always said it wouldn't entertain any talks before 800p was on the table, and, in the end, 800p is what it has got.
"Against a background of tough trading conditions and rising input costs, highlighted by SABMiller, the S&N board have done well to push the consortium to add a further 20 pence to their offer," said Tony Foster, investment director of UK equities at Scottish Widows Investment Partnership in a note.
The momentum is now firmly with S&N. And again, to their credit, the UK-based group is looking to leverage it straight away. Whilst the door to the negotiating room is open, S&N has hardly welcomed its suitors in with open arms.
As a spokesperson for S&N confirmed to just-drinks, GBP8.00 per share is being seen as "a starting point, not a finish" for the UK brewer. "GBP8.00 gets you through the door", the spokesperson added.
"I would be slightly surprised if they [S&N] caved in at 800 pence on the dot," another analyst was quoted as saying in the press. "I think there could be a little more upside to 800 pence."
S&N appears to think so too. As these pages reported, the brewer has now demanded that Carlsberg agree to the publication of confidential data on their joint brewing venture BBH "as a condition of recommendation".
S&N wants the Danish brewer to okay the publication of beer market volume growth for Russia and total BBH average selling prices, sales, EBITDA, EBIT and capital expenditure for the next three years.
Again the temptation must have been to move quietly to the negotiating table. After all S&N has won hasn't it? An offer of 800p is a compelling one. But by demanding that these figures are in the open - and if they are as good as S&N clearly believe they are - then the UK brewer may buy itself further breathing room from shareholders, who are eager to accept the cash, to squeeze Carlsberg for one more increase.
Sectors: Beer & cider
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