UK: Carlsberg and Interbrew could be winners but at what price?
But both are going to pay well over the odds for the privilege, with Bass PLC expected to pocket £2.2 billion and Whitbread Beer Company touted at £400m, both amounts nearly double the real value of each company, sources said.
Fever pitch is the best description of how the speculation surrounding the producer of the Carling brand, Bass Brewers, has escalated. According to a brewer who was bidding for the company but has since withdrawn, the fight is a two horse race between Carlsberg and Heineken, as the rest have all baulked at the eventual price. South African Breweries (SAB) has high-tailed it back to the Transvaal, Interbrew is now focusing its attention on Whitbread and Anheuser-Busch, the world's biggest brewer, has changed tack and could be sniffing around Diageo's Guinness yet again, the source said.
Carlsberg is reported to have raised £2.2 billion from a bond issue to fund its bid. "Equity partners are throwing money at many of these deals. All you need is £500m in initial equity to raise this figure," said one analyst.
Heineken could buy Bass easily but the company told just-drinks last month that it would not "pay over the odds" for Bass. This leaves the door open for Carlsberg. Both companies have refused to comment on the auction after signing confidentiality agreements. Analysts believe the true value of Bass is somewhere between £1.2 billion and £1.5 billion.
Officially, Bass PLC issued a statement last week claiming it will announce the conclusion of its strategic review of its brewing operations on Thursday at its interim results. "We will be giving an update on what is going on but that doesn't mean we will name anyone," said a Bass PLC spokesman.
By the end of the week, the two questions dominating the brewing industry should be answered. Bass and Whitbread, with over 150 years of brewing experience between them, will exit brewing. Interbrew has been named the most likely candidate for Whitbread because of the synergies with Stella Artois, its core brand, which would unstable Heineken's UK on-trade presence within Whitbread's retail chain.
Deutsche Bank, which is allegedly acting on behalf of Whitbread to find a buyer, believes the operation is worth £350m-£400m, sources said, but the real value could be as low as £120m-£150m. "Best Bitter is not a global brand and the other successful brands are all on licence. Whitbread does not own these brands," said an analyst with a US investment bank.
Though Interbrew looks like the only real candidate, one challenger has thrown down the gauntlet. Last week, Tasmanian brewer J Boag & Sons decided to withdraw its bid for Bass but announced to the Australian Securities Commission that it intends to make an offer for Whitbread. Boag's itself has just accepted a takeover bid from the Philippine brewer San Miguel, which it hopes to entice into the race. "We have decided to withdraw our bid for Bass but are now interested in making an offer for UK brewer Whitbread. J Boag & Sons, with its partner San Miguel, will be leading a team of equity partners in our bid for the brewer," the company said in a statement.
So far the brewer has received no response from Whitbread, the company said.
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