Chris Brook-Carter

Rumours brewing

By: Chris Brook-Carter - 28 January 2004 16:24

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Shares in the UK's Scottish & Newcastle were at a 12-month high yesterday as close to six times the average number of the brewer’s shares changed hands.

The most logical explanation behind the leap was a Credit Suisse First Boston investment note that has suggested the company can make substantial savings by restructuring and closing two of its five breweries (see yesterday’s news). However, when just-drinks spoke to S&N today we were told: "It's just analysts' speculation. We've nothing to add on the matter."

However, more exciting explanations include rumours that the wine and spirit giants Diageo and Allied Domecq are both considering making bids for the UK’s number one brewer.

Any such deal would bring together a powerful spirits portfolio with a strong beer range in the UK - a great package for the on-trade especially. In Diageo’s case, you can add Guinness to the mix and the potential takes even better shape.

Diageo CEO Paul Walsh has hinted at beer alliances in the past, with Heineken for example. Indeed, the owner of Smirnoff already has a joint venture with the Dutch brewer in Liberia. And S&N is certainly vulnerable at present.

But Diageo has shied away from making acquisitions in the relatively low-margin beer industry in the past, and it seems unlikely Allied would want to get back into beer having disposed of its brewing interests in 1996.

More likely is that if a takeover is to emerge from anywhere, it will be from within the beer industry itself. SABMiller and Anheuser-Busch remain the most obvious candidates.

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