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HOLLAND/UK: Analysts cool on Heineken, S&N bid talk

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Analysts have played down the prospect of Dutch brewing giant Heineken bidding for UK-based rival Scottish & Newcastle.

Shares in S&N rose this morning (30 March) as the market buzzed with speculation that Heineken may table an offer for the brewer, either alone or in tandem with Denmark's Carlsberg.

Industry watchers believe that the beer industry could soon witness a renewed round of consolidation. The last heavyweight deals came in 2005 when Canada's Molson joined forces with US rival Coors Brewing Co. In the same year, SABMiller also pounced to buy Latin American brewer Bavaria.

A Heineken spokesperson declined to comment, while Carlsberg alsorefused to be drawn on the speculation. S&N officials could not be reached for comment.

Industry analysts, meanwhile, believe Heineken is unlikely to make a move for S&N. One analyst, who wished to remain anonymous, told just-drinks that there is "little impetus" for a deal.

The analyst said there would be question marks over how Heineken and Carlsberg would finance any deal, given the ownership structure of both brewers. Heineken would also face competition problems in markets like Russia and France, where an acquisition of S&N could give them dominant industry positions.

The analyst said: "Most brewers are trying to diversify away from Western Europe and buying S&N would entrench them deeper in Western Europe. The region has stable cashflow but it's never going to deliver 10% volume growth. All you can do is try and take more costs out of the business to try and make it more efficient."

In recent years, multinational brewers have fought to gain access to the world's emerging beer markets like China, India and Vietnam to alleviate stagnant growth in more traditional markets.

The analyst said Heineken's ambition would be to bolster its presence in regions like Latin America or Asia-Pacific.

The analyst added: "If Heineken has learnt anything from its share price over the past few years, when InBev and SABMiller's shares have both outpaced it, it's that people value top-line growth - and that top-line growth is driven by greater exposure to emerging markets."

Earlier this week, Carlsberg president and CEO Nils S. Andersen told just-drinks that there would be continued consolidation in the global beer market. He said Carlsberg would continue to look for acquisition opportunities but added that the brewer's ownership structure meant it is unlikely that the company would take part in any large-scale deals.

Andersen said: "We have a foundation and they have a charter and they need to stay in control of the Carlsberg business. So long as that's the case, then there will be no large combination with Carlsberg involved."


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