UK: Interbrew given two options to solve Bass dilemma
The UK Minister of Trade and Industry, Patricia Hewitt, has ruled that Interbrew, the Belgian beer giant, must either sell all of Bass Brewers or its Carling operations in order to remedy the adverse effects of its merger with Bass Brewers.
The disposal of the Carling business would allow Interbrew to retain Bass Brewers' operations in Scotland and Northern Ireland, together with the breweries at Glasgow and Belfast and the Tennent's and Bass Ale brands.
However, under the government's terms, the Belgian brewer would have to dispose of the remainder of Bass's UK business, including the Carling brand, to a buyer approved by the Director General of the Office of Fair Trading.
Hewitt said Interbrew would have to decide which of the options will be least damaging to its commercial interests and implement the decision by 28th February.
She also said that if Interbrew were to sell the Carling operation, it would have to agree to certain "behavioural undertakings", including agreeing to supply the purchaser with "such brands and volumes as it would need" to supply Scottish on-trade accounts.
Analysts believe it is unlikely that Interbrew will opt to dispose of the entire Bass business as it would leave the group in a significantly weakened position to rivals Scottish & Newcastle.
Stuart Price, drinks analyst with WestLB Panmure said: "There is after all, a positive relationship between EBITDA margins and market share. As such [the Interbrew] management only has the Carling option."
Price continued: "We believe that the contenders for this business include Heineken, SAB or Anheuser Busch. Although we would prefer Heineken to withdraw completely from the UK and to treat it as an export market, we can see the benefit of Heineken acquiring brand. This would help reduce US exposure and give the group a better market-risk profile."
Price went on to say that although SAB had said it would only be interested in the whole of Bass, it believed the brewer would still be interested in the 19% market share Carling would bring with it.
The sale of Carling and its operations should net Interbrew in the region of £1.2bn (US$1.75bn).
Bass Brewers, the UK's second largest brewer, was sold to Interbrew by Bass PLC (now Six Continents PLC) in June 2000 for £2.3bn. The deal was referred to the UK competition authorities, which subsequently ordered Interbrew to sell the business on.
However after an Interbrew appeal, a judicial review concluded that while the Competition Commission's findings were right, the order to sell the whole business was unfair. The deal was then referred back to the Department of Trade and Industry.
2000 - Interbrew
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