Belfast Telegraph

Thursday 18 December 2014

S&N demands Carlsberg sells its BBH stake

Scottish & Newcastle is threatening to take Carlsberg to court in Sweden if the latter does not sell it its stake in the Russian brewer they jointly own.

The development marks an extraordinary escalation of hostilities that broke out last week after Carlsberg partnered Heineken to launch an unsolicited bid for the Edinburgh brewer.



In a letter sent to Carlsberg yesterday, S&N's solic-itors at Linklaters accuse Carlsberg of violating the shareholder agreement that governs the two companies' joint ownership of Baltic Beverages (BBH), the fast-growing Russian business that is seen as S&N's prime asset. Analysts estimate it will fetch an estimated £4bn.



According to S&N, when Carlsberg tabled its offer last week, it "constituted initiation of the voluntary termination provisions of the Agreement under which Carlsberg is obliged to offer its shares in BBH to S&N". Under the offer, Carlsberg would take control of BBH, France and Greece, and Heineken would take UK and the rest of Europe. A spokesman for the bidders would not comment.



S&N's gambit puts it in the unusual position of simultaneously looking to take 100 per cent control of the BBH business or getting rid of it entirely. It emerged at the weekend that S&N was sounding out buyers who would be willing to pay top dollar for its BBH holding in an effort to squeeze more cash out of the stake than Carlsberg would pay.



Under an odd accord from Swedish law that governs the ownership of BBH, when S&N bought Hartwall and Carlsberg purchased Pripps, they inherited the ownership agreement known as a "shotgun contract". The deal entitles either company to make an offer for its partner's stake in BBH. The catch is that if the other responds with a higher bid, then the first bidder is obliged to accept.



S&N is understood to have been furious at Carlsberg's bid last week, which was done with no warning or prior discussion. Since then, S&N has been frantically trying to stymie the bid. The company said yesterday: "S&N had been content with the joint ownership arrangements in BBH and had wanted them to continue for the long-term. However, given the breaches of the agreement by Carlsberg and their serious implications for BBH, the board of S&N has felt compelled to respond swiftly to protect its position and to capture the full value of BBH for the benefit of S&N's shareholders."

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