The UK's largest brewer Scottish & Newcastle said today that it had launched a bid for Finnish brewery group Hartwall PLC. The all-share offer values the Finnish company at €2 billion (US$1.8 billion).

Hartwall is Finland's leading beer producer and an important soft drink company, but importantly holds half the shares in Baltic Beverages Holding (BBH), a high growth joint venture with Carlsberg Breweries operating in Russia, Estonia, Latvia, Lithuania and the Ukraine.

The new business will be a market leader in seven European countries, with sales totalling around €7.4 billion and control three of the continent's top ten beer brands Kronenbourg, Foster's and Baltika.

"By adding the strong growth position of BBH to Scottish & Newcastle's western European platform, enhanced by the Finnish market position of Hartwall, we are creating a leading force across the whole of Europe from Siberia to the Atlantic," said Scottish & Newcastle chairman Brian Stewart.

The deal has the support of the Hartwall board and Erik Hartwall, managing director of the Hartwall family holding company, said the offer "represents an attractive opportunity for Hartwall shareholders to participate in a leading European brewer with a well-balanced market mix and strong expansion opportunities."

The deal gives S&N access to BBH, the Danish-Finnish, which had been expanding in fast-growing Russia. S&N has been criticised in the past for relying to heavily on the slow growth markets of Western Europe.

BBH is the clear market leader in Russia with a 30% percent share, as well as being the number one in Estonia, Latvia and Lithuania.

News of the merger comes after an investment conference where S&N chairman, Brian Stewart, once again underlined the international aspirations of the UK-based brewer. Stewart said he saw "terrific" growth opportunities around the world.

The speech comes amid long-running speculation that S&N will enter a three-way merger with South African Breweries and Miller of the US. Another route to international growth, which has been touted, is a possible takeover by S&N of India's United Breweries with whom it recently entered £60m joint venture.
 
"We're seeing terrific opportunities throughout the globe for integrating businesses and generating real shareholder value," Stewart told the Gerrard Investment conference. "We've never had more opportunities coming to us as a business than we do at the moment."

S&N has grown its international beer business from £9m earnings before interest, tax and amortisation in 2000 to £71m in 2001 though the cost of international expansion has required restructuring in other parts of the business.

It has also been reported that S&N has named Jeremy Blood as its corporate affairs director. He succeeds Richard Gibb who is to become managing director of S&N International.