Heineken may acquire Scottish & Newcastle

Heineken may acquire Scottish & Newcastle

Heineken may acquire Scottish & Newcastle

Brits may love their beer, but it seems the Dutch are even keener to keep on brewing the stuff. Holland’s Heineken is the largest brewer in Europe, and it could get even bigger if rumors that it will soon launch a takeover of British rival Scottish & Newcastle prove true.

Shares in Scottish & Newcastle were up 12.1%, to 595.0 pence ($11.68), at the end of Thursday trading in London. The company makes Foster's, Kronenbourg 1664 and Strongbow brands.

The volume of trading was ten times higher than normal at 45 million shares, indicating a large amount of the stock was being bought.

Scottish & Newcastle has seen modest operating profits, up 1.5% to £206 million ($404 million) in 2006, and its market share for beer and cider increased 0.9% in the same time period.

The company has a 50% holding in Russia’s Baltic Beverages Holding, and a 37.5% holding in United Breweries, India’s second biggest brewer.

Analysts believe Heineken would most likely be interested in these emerging markets footholds. Scottish & Newcastle’s Russian presence in particular would complement Heineken’s existing business there.

“That’s the jewel in the crown,” Ben Maitland, an analyst at West LB, told Forbes.com. Scottish & Newcastle’s Russian operations account for about a third of its revenue, with much of the rest coming from the already-saturated markets of Britain and France.

“Those markets are very mature and in decline,” said Maitland. “If Heineken did go ahead and complete an acquisition, then my view is they would sell off those parts of the business and keep the positions in other emerging markets like India and China.”

Other beer makers in the British Isles seem to have been flourishing recently. Ireland’s C&C had its delectable Magners Cider to thank for operating profits that rose 66% to $151 million for the first half of 2006.

Shares in Heineken were up 91 euro cents ($1.21), or 2.4%, at 38.89 euros ($51.85), at the close of trading in Amsterdam on Thursday.