It was a cruel irony of the Grand National earlier this month, that there were so many runners and riders for the sponsor itself. Scottish & Newcastle has been the subject of speculation for longer than the famous race itself.
"There have been rumours about a sale for seven years," says Simon Hale, drinks analyst at JP Morgan. But since February it's been linked with some of the biggest stayers in the game: InBev, Anheuser-Busch, Heineken, Carlsberg, SAB/Miller and Diageo are all in the frame, according to various sources, with the latest report one of the most intriguing.
According to the FT, Diageo and SABMiller have been talking about splitting the prize between them, with SABMiller taking the international operations, Diageo mopping up the UK division and the French arm siphoned off to private equity.
SABMiller and Diageo have since gone cold on this idea, as the share price climbed to more than 600p at one point (up 6.8% since the start of the year). But it's not hard to see why the Edinburgh-based PLC would be attractive. The group's well-known stable of beers in the UK and France include Kronenbourg, John Smith's, Foster's and San Miguel as well as ciders Strongbow and the newly launched Jacques. It also has a 50% stake in Baltic Beverages Holdings (BBH), a highly-prized jv with Carlsberg in Russia, and stakes in the Indian United Breweries and Chongqing in China.
At £8.5bn, including debt, S&N is is a mid-tier player in a market increasingly obsessed with size. S&N also has no controlling shareholder and an open share register, making it one of the easier brewers to acquire, says Hale. Tough conditions in the key UK and French beer markets, which account for nearly two-thirds of sales, along with slender cash resources, also limit options for growth. Ongoing profitability improvements already rely on cost-cutting. In January it announced plans to cut £50m in costs over the next three years. It also warned the UK smoking ban would cut profits by £10m.
So how has this race played out and who's likely to win? First off was A-B, which, according to a Brazilian newspaper in February, had been holding talks with InBev over a joint bid. There's a nice fit for Heineken in the UK, where its premium offering would be complemented by the everyday portfolio of S&N - John Smith's and Foster's. But it could run into competition issues in France, Greece and even Russia and is said to be interested in other markets.
The smart money is on Carlsberg because it is S&N's partner in the Russian jv, says Hale. "Two years ago, Carlsberg's CEO was talking about it, though recently he ruled it out following an improvement in its performance over the past 18 months." There would be significant competition issues for such a move, however, particularly in the UK and France, and the charitable foundation that runs Carlsberg would also have to change its regulations to pass it.
SABMiller's interest was mooted in March. It was quickly dismissed by CFO Malcolm Wyman, who described the western European beer market as "singularly unattractive". Yet SABMiller would love to get into emerging markets such as Russia, India and China.
The joint deal, too, would give Diageo a stronger beer stable. With Guinness sales struggling internationally and Harp now a C-lister, the deal would give it cross-selling and cost-saving opportunities.
Many analysts still believe a joint Diageo/SABMiller takeover most likely. Yet others can't see it. "Diageo's interests lie mostly in spirits," says Sam Hart, analyst at Charles Stanley. "It is unlikely to want to expose itself further to the difficult western European beer market." The least likely goer is private equity. "Since it can't buy it cheaply it would need to cut costs, but S&N is doing that," says Hale.
So, failing a successful acquisition, can S&N survive? "It is a very cash-generative business. The management is doing a good job creating an efficient business," says one City source. "It will have to expand internationally," says another. "It doesn't have the cash but it could look to more jvs and bolt-on deals."
In the meantime it is keeping itself busy. It has invested in new chilled technology to capitalise on the emerging cider "over ice" category. It sold its Courage brands to Charles & Wells and passed the marketing of Peroni and Miller back to SABMiller. It also struck a licensing deal to brew Russian beer Baltika in the UK. But in this acquisitive market its assets appear too attractive to ignore. One challenge for bidders may be the price. Perhaps the bigger question is how the big nags divide the prize.
"There have been rumours about a sale for seven years," says Simon Hale, drinks analyst at JP Morgan. But since February it's been linked with some of the biggest stayers in the game: InBev, Anheuser-Busch, Heineken, Carlsberg, SAB/Miller and Diageo are all in the frame, according to various sources, with the latest report one of the most intriguing.
According to the FT, Diageo and SABMiller have been talking about splitting the prize between them, with SABMiller taking the international operations, Diageo mopping up the UK division and the French arm siphoned off to private equity.
SABMiller and Diageo have since gone cold on this idea, as the share price climbed to more than 600p at one point (up 6.8% since the start of the year). But it's not hard to see why the Edinburgh-based PLC would be attractive. The group's well-known stable of beers in the UK and France include Kronenbourg, John Smith's, Foster's and San Miguel as well as ciders Strongbow and the newly launched Jacques. It also has a 50% stake in Baltic Beverages Holdings (BBH), a highly-prized jv with Carlsberg in Russia, and stakes in the Indian United Breweries and Chongqing in China.
At £8.5bn, including debt, S&N is is a mid-tier player in a market increasingly obsessed with size. S&N also has no controlling shareholder and an open share register, making it one of the easier brewers to acquire, says Hale. Tough conditions in the key UK and French beer markets, which account for nearly two-thirds of sales, along with slender cash resources, also limit options for growth. Ongoing profitability improvements already rely on cost-cutting. In January it announced plans to cut £50m in costs over the next three years. It also warned the UK smoking ban would cut profits by £10m.
So how has this race played out and who's likely to win? First off was A-B, which, according to a Brazilian newspaper in February, had been holding talks with InBev over a joint bid. There's a nice fit for Heineken in the UK, where its premium offering would be complemented by the everyday portfolio of S&N - John Smith's and Foster's. But it could run into competition issues in France, Greece and even Russia and is said to be interested in other markets.
The smart money is on Carlsberg because it is S&N's partner in the Russian jv, says Hale. "Two years ago, Carlsberg's CEO was talking about it, though recently he ruled it out following an improvement in its performance over the past 18 months." There would be significant competition issues for such a move, however, particularly in the UK and France, and the charitable foundation that runs Carlsberg would also have to change its regulations to pass it.
SABMiller's interest was mooted in March. It was quickly dismissed by CFO Malcolm Wyman, who described the western European beer market as "singularly unattractive". Yet SABMiller would love to get into emerging markets such as Russia, India and China.
The joint deal, too, would give Diageo a stronger beer stable. With Guinness sales struggling internationally and Harp now a C-lister, the deal would give it cross-selling and cost-saving opportunities.
Many analysts still believe a joint Diageo/SABMiller takeover most likely. Yet others can't see it. "Diageo's interests lie mostly in spirits," says Sam Hart, analyst at Charles Stanley. "It is unlikely to want to expose itself further to the difficult western European beer market." The least likely goer is private equity. "Since it can't buy it cheaply it would need to cut costs, but S&N is doing that," says Hale.
So, failing a successful acquisition, can S&N survive? "It is a very cash-generative business. The management is doing a good job creating an efficient business," says one City source. "It will have to expand internationally," says another. "It doesn't have the cash but it could look to more jvs and bolt-on deals."
In the meantime it is keeping itself busy. It has invested in new chilled technology to capitalise on the emerging cider "over ice" category. It sold its Courage brands to Charles & Wells and passed the marketing of Peroni and Miller back to SABMiller. It also struck a licensing deal to brew Russian beer Baltika in the UK. But in this acquisitive market its assets appear too attractive to ignore. One challenge for bidders may be the price. Perhaps the bigger question is how the big nags divide the prize.
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