S&N or S&M?
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.
But 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?
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.