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S&N or S&M?

Robert Peston | 10:00 UK time, Thursday, 18 October 2007

There are times when the non-executive directors of a company have to decide what’s in the interests of shareholders, in a way that can seem patronising and out of touch with what those investors are thinking.

newcastle_pa.jpgBut even if you accept that investors don’t always know what’s good for them, it was surprising to read the statement from the UK’s last remaining independent brewer of any size, Scottish & Newcastle, that a “proposed break-up bid from Heineken and Carlsberg… is unsolicited and unwelcome”.

Carlsberg and Heineken have indicated (and will firm this up in a few days) that they want to pay well over £7 for something that yesterday morning was trading in the market at nearer £6. And yet that odd couple from the Continent was told to hop off in no uncertain terms.

Few companies have reacted with such hostility to a putative bid since I was a cub reporter in the 1980s. That was the bad old days of boards being almost wholly detached from the interests of their owners. It was a rather depressing time of managerial capitalism, when directors behaved like oligarchs accountable to almost no one.

Make no mistake, I can see why the executives of a company may not be ecstatic that their company could fall into new ownership. Even if they keep their jobs, they would probably find themselves rather lower down the food chain in an enlarged group.

What’s more, it is natural for their employees to be anxious.

And all of us should be fearful about the implications for the economy – the national economy and local ones – if new owners were to curtail investment or even cut back production.

Also, we should feel a bit nervous that another brick in the foundations of the British economy may well end up in overseas hands – and wonder again whether it matters that the ownership structure of Heineken and Carlsberg makes it harder for any bidder to take over one or both of them.

In Scotland and the North East, where S&N has its roots and residual operations, there will be particular concern about all this. If there were any doubt about the sustainability of S&N’s plant in Gateshead, that would unsettle a part of the UK whose confidence has already been dented by the Northern Rock debacle.

That said, it would be slightly odd for S&N to play the nationality card. In the past, it closed down totemic breweries in Edinburgh and Newcastle. And of its 37,000 employees in directly owned businesses, joint ventures and investments, only around 4,500 are in the UK. It has interests all over Western Europe, Eastern Europe and Asia.

So will the board’s furious reaction to Heineken’s and Carlsberg’s ambitions lessen the potential damage – if there be any – to British economic interests?

That’s doubtful.

In fact shareholders are now more likely to put explicit pressure on the board to resist whatever temptation they may feel to stand in the way of a proper takeover offer.

Or to put it another way, the aggression of the board may well rebound on itself.

Brewing is a global, consolidating industry. Other big drinks businesses, and especially SAB Miller, won’t want to see Heineken and Carlsberg snatch S&N’s desirable brew and will be weighing possible offers of their own.

S&N is “in play”, to use the ghastly City expression. And, almost as a law of nature, it will now be taken over.

Comments   Post your comment

  • 1.
  • At 10:18 AM on 18 Oct 2007,
  • Dave wrote:

After closing their breweries in Scotland and Newcastle, they should be referred to as "&" or "Ampersand Brewery"

  • 2.
  • At 10:58 AM on 18 Oct 2007,
  • Ron wrote:

No matter how much S&N have changed over the years, this is another example of the farcical imbalance in Europe of national protectionism outside of the easy to acquire UK assets.
Why don't we do as the French et al and make it much more difficult for foreign take overs in our country. We need a level playing field or UK plc will be lost forever.

  • 3.
  • At 11:14 AM on 18 Oct 2007,
  • Peter Hutchinson CBE wrote:

I agree that it is unwise for the Board of S&N to reject a take over approach at this stage. As a small investor I would support a sale at the right price. I hope the larger shareholders will put pressure on the board, which may well be thinking of their own interests rather than the shareholders.

  • 4.
  • At 06:39 PM on 18 Oct 2007,
  • Jim Urbonas wrote:

Like a girl who says to when someone asks her out, S&N is playing hard to get. The more they reject the offer, the more they can press for a higher takeout price. So eventually a knockout offer will come, whether from the unwelcome twosome of Carlsberg and Heineken, or from a shining white knight like Molson or InBev.

But if she plays too hard to get, S&N will remain a gooseberry to the dance of beverage consolidation. Cheers!

  • 5.
  • At 06:53 PM on 18 Oct 2007,
  • ronnie wrote:

As an ex S&N employee who was tupe'd off by the current board I've sold off my remaining shares and hope the board that has continually pocketed the proceeds off sell offs like centre parks get shafted themselves

  • 6.
  • At 09:48 PM on 18 Oct 2007,
  • Rich wrote:

I am also an ex dedicated S&N employee who was TUPE'D off after many a year of having the "we will have to contract out if you don't do as we ask" card played. We did as they asked and yet we were still contracted out, so I for one will not worry about the S&N board as I sell my shares for the good of "my own shareholders"(my family).

  • 7.
  • At 12:31 PM on 19 Oct 2007,
  • thomas barton wrote:


Having been a small customer of S&N for 15 years I will be more than pleased to see them taken over if it means a new management team is put in
to say that the way they have conducted business at my level leaves a lot to be desired is in my case an understatement

  • 8.
  • At 01:32 PM on 19 Oct 2007,
  • Sandra wrote:

I am a former employee and still a shareholder. The take over of S&N will be a disaster for Edinburgh. I started my career there and the remain the only global employer if you don't want to work for a bank. Maybe we should all work for banks and no one produce anything?

  • 9.
  • At 03:54 PM on 19 Oct 2007,
  • Clifford wrote:

"Few companies have reacted with such hostility to a putative bid since I was a cub reporter in the 1980s."

What about the LSE?


"S&N is “in play”, to use the ghastly City expression."

So, don't use it!

  • 10.
  • At 05:24 PM on 19 Oct 2007,
  • Geoff wrote:

As a long time small investor I have not forgotten the large cut in dividend payments made by the board a few years ago. I therefore support the possible takeover,as any board that has to cut its dividend has failed.

  • 11.
  • At 08:59 PM on 19 Oct 2007,
  • Scamp wrote:

It will be sold... There's no way the boys in the City would consider doing something industrially patriotic.

Trouble is that they're running out of things to sell but not creating anything new. But of course that doesn't bother them.

Save the UK - push a fund manager under a train.

  • 12.
  • At 02:58 PM on 20 Oct 2007,
  • Chris wrote:

You discuss what might happen to the (S&N)directors but forget to mention such people do very well out of takeovers. They presumably have golden parachutes and they will be able to exercise their share options early and profitably!

  • 13.
  • At 09:05 PM on 20 Oct 2007,
  • Anonymous wrote:

477. At 04:22 PM on 14 Jul 2007, Nikos Arechiga wrote:
Dear Robert,

Widows is not "an idiot´s product". Microsoft´s success comes from being the first company to provide cheap software. I don´t mean cheap as in paying a dollar for a license, but I mean cheap as in "regular people like you and me can actually afford it". Computers used to be about as expensive as airplanes. Microsoft started a revolution in computing. However, this revolution is over. There are other affordable systems (in fact, there are some free systems...). If Microsoft wants to keep being successful, they need to focus on quality now. Windows is much less efficient an much less stable than the linux systems... and much less pretty than MacOS.

It sounds like you have a problem on your hands. If you wanted to keep your computer you could switch to linux... however, don´t be fooled by the cheerfulness of linux critiques that say it isn´t really all that difficult. Admittedly, linux technology has advanced at a rapid pace and is much more user friendly than it was five years ago; but it´s still no walk in the park.

I would personally recommend switching to linux and fighing it out... maybe with one of friendlier distributions like OpenSuse or actually paying for one of the better supported distributions like Red Hat or Mandriva while you muster the confidence to venture off on your own. However, computer taming might not be something you have time or enthusiasm for.

Even if you´re not a computer type, though, I think it is important that you become more computer literate. It seems to me like a computer is a fairly important tool to you. Picking up a few computer skills might be very beneficial to your work. Play around with it. Change things on it. Download new software. (Make sure to scan it with an antivirus...). Stay ahead of the game. It´s not just Microsoft that abuses its users... do you use Norton Antivirus? Don´t. Their evil subscription scheme deactivates Norton unless you pay them... Switch to Free AVG: free.grisoft.com. Try to find free alternatives to the software you use the most.

I hope it all works out for you,

--Nikos

  • 14.
  • At 11:23 PM on 22 Oct 2007,
  • Charlie wrote:

Another ex-S&N employee, I'm afraid....however, I left under my own steam, but I can sympathise with the many of postings about being TUPEd out (or the mass of redundancies which have also taken place) in recent years - as much has been auctioned off and the company has been pared back. Many have suspected a "thinning" operation to make the company more attractive as a takeover target - which makes the protestations of the Board more surprising!! I can only conclude this was not the suitor they were after.

However, to those playing the patriotic card, you should note that S&N has decimated it's directly employed staff and UK operations(yes, it will be a sad loss, particularly for the HQ in Edinburgh - but I'm sure the large UK breweries e.g. Manchester will still exist in any new setup). Also, I note the posting about the UK being "easy on takeovers". S&N, for example, owns all or major chunks of Kronenbourg (France), Alken Maes (Belgium), Sagres (Portugal), Mythos (Greece) to name a few....

As a Scot, I'm sad to see yet another manufacturer disappear (and one which has developed a global standing at that) and to see a number of ex-colleagues put through even more uncertainty at this time of year.

I'll raise a glass to the hard-working staff of S&N (past and present) who have put the company where it stands today. Let the UK consumers of S&N's well-kent brands decide what their poison will be after they see how well the company is treated in the coming months....

There's always Belhaven, Theakston or many other fine UK-based brands to choose from if we wish to be patriotic....

  • 15.
  • At 11:22 AM on 26 Oct 2007,
  • John wrote:

Increasingly, everything we buy in the UK is made overseas, by overseas companies, supported by offshore call centres and back office facilities. I challenge anyone to find something in the argos catalogue that is made in the UK by a British company.

Therefore, we cannot all simply work in service industries moving money around the country, we need to earn money from overseas to pay for all the imports. Tourism has it's limits due to our climate and often creaking transport infrastructure.

At the moment, the UK excels in financial services, and we make a fair bit out of selling our expertise to developing nations.

But developing nations will be able to do it themselves within a generation and as we saw with the Northern Rock debacle, an on-going strong financial services sector is far from guaranteed. And when our lead in every industry we were once strong in has gradually eroded, why should Financial Services be any different?

When you consider that natural resources such as North Sea Oil and Gas are fast running out, the picture is far from rosey.

At least while the head office of S&N is in the UK, when a French person toasts their national team beating a UK team with a pint of Kronenbourg, The UK makes some money out of it (only fair when you consider how many cars we buy from them!)

I can understand that the people made redundant have no sympathy with the fat cats who made them redundant, but there will be fat cats involved whether it's sold or not, and from a UK perspective it's better that the fat cats are based in Edinburgh spending their ill-gotten gains there, than in Holland or Belgium.

Will a new owner close existing factories? Who knows, but who would have expected Heinz purchase of HP Foods to move the production of a product that nobody but ex-pats buys outside the UK (HP Sauce) to Holland? Talk about carbon emissions!

The UK still has a few big conglomerates with interests around the world, S&N, Unilever, Cadbury Schweppes, EMI etc, but they all have overseas suitors sniffing around them, if takeovers continue as quickly as they have done in recent years then there could be literally no UK based major companies in a few years.

Yes the sale of multi-billion companies O2, Allied Domecq, Abbey gives a short-term boost to the UK economy, but once that's gone, what do we have left?

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