S&N rejects Carlsberg, Heineken offer

LONDON (Reuters) - Britain's biggest brewer Scottish & Newcastle SCTN.L rejected a 6.8 billion-pound ($14 billion) bid on Thursday from Carlsberg (CARLb.CO) and Heineken (HEIN.AS) calling it a derisory bid to buy the business on the cheap.

The Danish and Dutch brewers' offer of 720 pence in cash is below S&N's share price, which spiked last week when Carlsberg and Heineken were forced to reveal they were planning a bid, and is short of the 800p which some analysts say could seal a deal.

The Edinburgh-based brewer's response came after it received a private letter from the chief executives of Carlsberg and Heineken at around midday with a proposal which was conditional on a S&N board recommendation and extensive due diligence.

"This unsolicited and derisory proposal is an effort to get S&N's unique portfolio of businesses on the cheap," S&N Chairman Brian Stewart said in a statement. "We will continue to take all actions to maximize shareholder value. I strongly urge shareholders to take no action."

Shares in S&N, Britain's last big independent brewer and number six in the world, closed off 0.5 percent at 758-1/2p. Carlsberg shares were suspended up 1.9 percent at 688 Danish crowns. Heineken shares ended up 1.6 percent at 47.32 euros.

"We believe that the 720p offer is merely an opening shot from Carlsberg and Heineken, and they will return with a higher offer," said analyst Sam Hart at brokers Charles Stanley.

"A bid in excess of 820p could be justified, and the board would be obliged to consider any offer above 800p," he added.

Analyst Matthew Webb at Cazenove added: "We see the 720p offer price as disappointing...we continue to believe that an offer of around 800p will ultimately be forthcoming."

A 720p bid values S&N shares on 21.3 times 2007 forecast earnings below Heineken on 24.6 times and Carlsberg on 23.5 times according to Reuters Estimates, and analysts say this gives little premium for control and value to any cost savings.

The Carlsberg and Heineken consortium said its offer was a compelling proposition for S&N shareholders and added in a statement: "The consortium wishes to confirm its desire to pursue a transaction on a recommended basis."

They added their joint bid company would be a 50-50 venture with economic contribution by Carlsberg and Heineken being 54 and 46 percent, and both said they had financing in place.

S&N has been seen as a takeover target for many years with the world's No. 5 Carlsberg seen as the most likely suitor due to its joint ownership with S&N of the fast-growing BBH which operates in the former Soviet Union.

BBH is seen as the jewel in S&N's crown as it controls over 85 percent of Baltika (PKBA.MM) the biggest brewer in the world's third-largest beer market, Russia, and provides around one third of S&N and Carlsberg's group earnings.

Carlsberg and Heineken said eight days ago they planned a joint bid for S&N, but gave no price, in a plan to split up S&N's brewing interest and avoid any regulatory concerns.

Under the plan, Carlsberg would acquire S&N's 50 percent stake in Russia-based BBH, France, Greece and S&N's Chinese business. Heineken would take control of S&N's business in the UK and other European markets such as Belgium, Portugal as well as its U.S. and Indian businesses.

(Additional reporting by Kim McLaughlin in Copenhagen)