The Hindu Business Line : S&N’s buyout brews trouble for UB

Bangalore, Jan. 25 British brewer Scottish & Newcastle’s acceptance of a takeover offer from a consortium of Carlsberg and Heineken has opened up the possibility of a change in control of United Breweries, flagship company of the Vijay Mallya group.

Earlier today, Scottish & Newcastle Plc (S&N) announced that it has accepted a $15.3-billion takeover offer by a consortium comprising Carlsberg and Heineken. S&N and UB Group each hold 37.5 per cent stake in United Breweries.

The acquisition of S&N by Carlsberg and Heineken could attract the terms of the Takeover Code triggering an open offer as there will be a change in promoter category in United Breweries, say analysts.

In a cautious statement on the deal, the UB Group Chairman, Mr Vijay Mallya, said: “While the UB Group has had an excellent and productive relationship with Scottish & Newcastle Plc during the period of the association, we welcome the fact that Heineken will be associated and be a potential shareholder of United Breweries Ltd on terms that are yet to be discussed and agreed.”

Takeover code

Analysts said that in case SEBI insists on an open offer, the consortium consisting of Carlsberg and Heineken might end up having a higher stake in United Breweries than the UB Group itself. As per the Takeover Code, an open offer should be for a minimum of 20 per cent of outstanding shares. This will be in addition to the 37.5 per cent stake in UB that will move into the hands of the Carlsberg-Heineken consortium following its takeover of S&N.

The UB Group’s President and Chief Financial Officer, Mr A.K. Ravi Nedungadi, told Business Line that it was not necessary that under the provisions of the Takeover Code, such a deal could trigger off an open offer. “However, we are awaiting further developments in this regard,” he said.

He said the company was examining various issues once the consortium takes over Scottish & Newcastle. “There are clearly certain specified circumstances under which we have pre-emption rights to buy back the shares of Scottish & Newcastle. I am not going to spell out what those conditions are,” he said.

However, an analyst with a leading global accounting firm said as the deal has been carried out outside India, it is open to question whether UB could invoke pre-emption rights. “It is important to know how strong the clauses regarding such an issue are in the agreement between S&N and the UB Group,” he said.

He said the UB Group could put forth an argument with SEBI that as the legal entity had not changed but only the management had changed, there was no need for an open offer. “If, however, SEBI refuses to accept the argument, UB Group will have a serious issue on its hand,” he said.

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