Scottish & Newcastle Has Sights on Baltic

Scottish & Newcastle, which is fighting to head off a takeover bid from Carlsberg and Heineken, said Tuesday that it could save nearly $200 million per year if it gained full control over Baltic Beverages Holding, its 50-50 joint venture with Carlsberg.

The Danish-Dutch consortium is offering 750 pence per share, or ?7.3 million ($14.4 million), for the brewery — in a so-called friendly bid. The company's board has rejected the offer and has refused to engage in talks with the suitors.

The UK Takeover Panel has given the consortium until Jan. 21 to either formalize its bid for S&N or pull out.

S&N argues that the offer significantly undervalues Baltic Beverages Holding, which owns the popular Baltika and Nevskoye brands. The brewer enjoys an almost 40 percent share of the country's beer market and stands to benefit from the market's rapid growth. In the first nine months of 2007, it said the market grew at a rate of 17.5 percent, the second straight year of double-digit growth.

Carlsberg has refused S&N's appeal to make public a three-year forecast on the joint venture's prospects on the grounds that the information is confidential.

S&N earlier launched legal proceedings against Carlsberg in Sweden, where it claims that Carlsberg exploited confidential information to launch its bid, and used a takeover bid to evade a "shotgun" agreement, which enables either party to exit the agreement by offering its shares to the other party. A Stockholm arbitration court is to rule on the case on July 3.

S&N said Tuesday that it had now submitted a detailed claim to the Stockholm court.

"While the consortium continues to seek to acquire S&N's unique portfolio of assets on the cheap, we are continuing to explore fully every option to deliver shareholder value," S&N chief executive John Dunsmore said in Tuesday's statement. "Carlsberg's desire to terminate the BBH joint venture by circumventing the BBH shareholders' agreement provides a huge opportunity for us to take control of BBH through a successful arbitration process."

But Carlsberg hit back Tuesday, saying S&N's claims were "frivolous and have absolutely no merit." It added that it would seek a termination of the proceedings owing to a "misuse of the arbitration process."

Shareholder pressure on S&N's board to negotiate with the consortium is said to be intensifying. S&N's Dunsmore said Tuesday, however, that a higher offer was unlikely to be attractive, Reuters reported.

Analysts expect the consortium to raise its bid before Jan. 21 to around 770 pence per share to bring S&N to the table.

"S&N is coming under pressure from its shareholders not to let the bid situation disappear entirely, because then the share price would tumble back down to 650 [pence] or so," said Trevor Stirling, an analyst at Sanford C Bernstein. "On the other hand, Carlsberg is under pressure to make sure that it doesn't … end up losing BBH altogether."