Scottish & Newcastle yesterday insisted it wanted to remain independent as the drinks giants Carlsberg and Heineken finally admitted they were in the early stages of planning a joint bid for the Edinburgh-based brewer.
The Danish and Dutch brewers, forced to show their hand by the Takeover Panel after S&N's share price began rising steeply, did not reveal a potential price.
But they unveiled a break-up plan for the brewer of John Smith's, Stella Artois and Newcastle Brown Ale. Under it, Carlsberg would take control of their Russian joint venture, Baltic Beverage, as well its French and Greek operations, and leave the UK and the rest of Europe to Heineken.
The company reacted unequivocally to the announcement, calling the plan "unsolicited and unwelcome" and urging shareholders to "take no action".
News of the potential offer sent S&N's shares soaring yesterday, finishing as the FTSE-100's top riser with an 18.8 per cent increase to 756p, valuing the group at £7.1bn.
A middling brewer that has largely sat out of a consolidation wave that has produced a few super-groups such as Anheuser Busch, InBev and SABMiller, S&N has long been the subject of takeover speculation. Its price has risen steadily over the past year due in large part to the assumption among investors it would be taken out, with Carlsberg repeatedly flagged as the most likely bidder.
If a deal comes to fruition for S&N, it will be the latest addition to a roster of British groups, including ICI, the Heathrow owner BAA, and Corus, the former British Steel, that have fallen to foreign buyers in recent years.
Some analysts questioned, however, whether S&N's skyrocketing stock price decreased the likelihood of the completion of the deal. "It's a bit of a dilemma. The stock is now up another 20 per cent. If you add a premium on top of that, it is a difficult exercise," said Marcel Hooijmaijers, an analyst at Landsbanki Kelper in Amsterdam.
Mr Hooijmaijers estimated that the bidders would likely have to pay at least 800p a share, or a total of £9.5bn, to sway investors.
The company's crown jewel is Baltic Beverage, or BBH, the Russian venture that is also half-owned by Carlsberg. BBH has been the strongest source of growth for S&N, benefiting from the strength of the Russian economy and the growing penchant there for beer over vodka.
Yet the nascent proposal is riddled with questions. For one, Carlsberg would probably be forced to issue shares to pay for its portion of the deal. Mr Hooijmaijers estimated that it would have to pay £5.4bn in total, broken down between £4bn for BBH, £1.25bn for France, and £150m for Greece. Heineken would likely be able to tap existing debt facilities for the roughly £4bn it would have to fork out.
The approach also comes at an awkward time. S&N named its new chief executive, John Dunsmore, just three weeks ago. He is set to take up the post on 1 November.
"It's a bit sensitive because it could be that on day one in the office he must come in and sell his company," Mr Hooijmaijers said.
Carlsberg's chief executive Jorgen Buhl Rasmussen has only been in the job since the beginning of the month.
Key to any offer's success will be the Hartwell family, the brewer's single largest investor with an 11 per cent holding. The Finnish family took the holding when it agreed to sell its eponymous company in 2002, the deal that gave S&N its now sought-after stake in Baltic. There was also speculation yesterday that SABMiller could come in as a white knight, though one analyst called that a "distant possibility", given that the company just announced a merger of its US business with Molson Coors 10 days ago. An SABMiller spokeswoman declined to comment.
Unite, the union that has clashed with S&N over worker compensation and overtime, expressed concern about the implications of a takeover. Brian Revell, the national organiser for food and drink, said: "Today's news comes as no surprise, but as the largest union in the brewing industry in the UK we will want to study the details of what is planned and consider their impact and clearly consult with our members."