S&N Mulls Triggering Shotgun Clause

LONDON -- Scottish & Newcastle could this week trigger a "shotgun" clause attached to its valuable Russia-based brewing venture in a last-gasp move to fight off a bid from Carlsberg and Heineken or extract an even higher price, analysts said.

Britain's biggest brewer has rejected three bids from its two European brewing rivals, but has now named the price at which it will open talks with the predators, making it vulnerable to an increased offer as a Jan. 21 deadline for a formal bid rapidly approaches.

Key to the increasingly bitter fight is S&N's and Carlsberg's Baltika Russian brewing venture that the Danish brewer wants to control. S&N wants either to extract a high price or turn the tables and buy out Carlsberg.

The Edinburgh-based brewer spent the weekend with its advisers contemplating an offer to buy Carlsberg out of Baltic Beverages Holding -- the venture through which the pair control Baltika and the main growth asset of both companies.

The offer would be made under the shotgun clause in the venture -- under which either party can offer to buy out the other at any time. The second party must then either match the price and take control itself, or accept the offer.

Sources close to the situation said S&N chief executive John Dunsmore was pondering whether to fire the shotgun and offer Carlsberg ?4.6 billion ($9 billion) for its half share of BBH, in the knowledge that the Danish brewer can match S&N's price and win.

"This option is clearly under consideration to fend off the bid or extract a higher offer," one source said.

If S&N wins the shotgun showdown, it has financing in place to control the whole of BBH, but if it loses, it will receive a pile of cash from Carlsberg, and there will be little incentive for the Copenhagen brewer to continue with the bid.

S&N declined to comment about triggering the shotgun, while a spokesman said, "All our options are open."

Carlsberg and Dutch bidding partner Heineken's current ?10 billion bid, including debt, values S&N's 50 percent share in BBH at ?4.2 billion, so S&N is effectively putting a value on BBH that the parties have been haggling about since October.

Analysts say putting a ?4.6 billion valuation on BBH makes S&N potentially worth 817 pence per share, or nearly ?8 billion, and gives the bidders a clear indication of what S&N would be willing to accept as a bid price.

Broker Dresdner Kleinwort has put a valuation on the half stake in BBH at ?4.5 billion.