UK: Analysts say Scottish & Newcastle vulnerable to takeover
According to Dow Jones International News, analysts believe that the brewer lacks the cashflow to aggressively expand its international operations. Its domestic prospects are also bleak, observers have told the news service.
Scottish & Newcastle's results, released yesterday, were in line with market expectations, with pre-tax profits of £415m. However due to confusion over new accounting standards, some forecasts were high and led to a sharp fall in the company's share price.
"If S&N's share price continues to drift at this level, then a potential takeout is possible," said an analyst.
Observers have picked out South African Breweries (SAB) as the only real contender for the business.
"Only SAB looks to have the motivation and cash to do it," said the analyst.
The article went on to say that S&N's Kronenbourg acquisition will only serve to make the group more attractive to a predator. S&N's home market also looks tough in the wake of Interbrew's aggressive entry.
Analysts said that S&N's John Smith's, Foster's, Kronenbourg and Miller's brands weren't likely to be a match for Interbrew's Carling, Stella Artois and Worthington brands.
However Merrill Lynch said in a recent note that the acquisition of Kronenbourg and Greenalls pub estate should double S&N's growth rate over the next two years.
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