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U.K. stops Interbrew buy
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January 3, 2001: 10:06 a.m. ET
Belgian firm's stock tanks as regulator tells it to divest $3.5B Bass Brewers
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LONDON (CNNfn) - The U.K. on Wednesday rejected Interbrew SA's £2.3 billion ($3.5 billion) purchase of Bass Brewers, telling the Belgian firm to find a new buyer for the unit.
Shares of Interbrew, which said it was reviewing the announcement, crashed 22.7 percent to  29 in Brussels.
The British government said merging the unit with Interbrew's own brewing assets would have led to higher beer prices and created an effective duopoly with the U.K.'s biggest domestic brewer, Scottish & Newcastle PLC  (SCTN).
Interbrew announced the agreement to buy Bass Brewers from Bass PLC (BASS) last June. The ruling does not mean Bass must take the unit back - it sold the business to Interbrew on an unconditional basis – but puts an obligation on Interbrew to find a new and acceptable owner for Britain's second-largest brewer.
"The merger would reduce competition in the market, lead to higher prices for end consumers, and reduce consumer choice," Stephen Byers, the U.K. Trade and Industry Secretary, said in a statement.
Including Bass Brewers and its recently-acquired Whitbread Beer Company, Interbrew would have had a leading share of the British market with 32 percent.
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 BOTTLES OF BRITAIN
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WHO'S BEHIND THAT PINT?
Scottish & Newcastle: Courage, John Smith's, Kronenbourg, McEwan's
Bass Brewers: Bass Ale, Carling, Caffrey's Irish Ale
Interbrew: Stella Artois, Labatt, Rolling Rock, Hoegaarden
Carlsberg Tetley: Carlsberg, Tetley Bitter, Special Brew
Heineken: Heineken, Murphy's Irish Stout, Amstel
Guinness: Guinness, Red Stripe, Harp
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The slide in Interbrew's shares cut more than 3.5 billion off the market capitalization of the Leuven, Belgium-based company, which had been worth some 16 billion at Tuesday's close.
Interbrew said in a statement Wednesday that the U.K.'s ruling "defies logic", calling the divestment order "disproportionate to the issues" at stake. It added it would hold talks with U.K. regulators on the timing of any resulting transactions after reviewing all its options. The firm went public only last month, selling 21 percent of its shares at 33 apiece, and continues to be controlled by its founding families.
"It comes as a shock," said David Liston, a drinks industry analyst with securities house Gerrard Ltd. in London. "The suggestions up to now had been that the way would have been clear if Interbrew would have agreed to some disposals. The question is: has it been naivete on Interbrew's part, or were they poorly advised?"
Liston said Dutch brewer Heineken NV, one of the world's biggest beer companies but so far only present in Britain via an alliance, was the front runner to buy Bass Brewers. Other possible bidders include world No. 1 brewer Anheuser-Busch Cos. (BUD: Research, Estimates) of the U.S. and South African Breweries PLC (SAB).
At Heineken NV, the maker of Europe's leading beer, "all options remain  open," spokesman Albert Holtzappel told Reuters. "We have always stated that we keep all options open. This hasn't changed."
In March 2000, Heineken Chairman Karel Vuursteen said Bass's brewing operations would fit with the Dutch company's strategy, but warned it would not overpay for the business.
Carlsberg-Tetley, the British arm of Danish brewing company Carlsberg A/S, said Wednesday it would be interested in bidding for Bass's brewing arm if it could be sure of getting U.K. regulatory clearance for such a deal, Reuters quoted CEO Colin Povey as saying.
Wary of antitrust review
"In view of the very new situation, we would like to now take some time to analyse it," said Margrethe Skov, a spokeswoman for Carlsberg. However, she said the Danish brewer is wary of putting such a purchase before the U.K. regulator, which three years ago rejected a merger of Bass Brewers and Carlsberg "for exactly the same reasons as with Interbrew."
Gerrard's David Liston said that Carlsberg has estimated the Bass Brewers unit is worth about £1.5 billion -- only about two-thirds of the price Interbrew paid.
The assets at stake include the well known Bass Ale and other popular beers, such as Carling and Caffrey's, which Interbrew hoped to add to its own Stella Artois and Labatt brands.
The Belgian company was expected to become the world's second-largest brewer as a result of the deal, overhauling Heineken of the Netherlands but still behind U.S.-based Anheuser-Busch Cos. (BUD: Research, Estimates).
In its adjudication, the U.K. Competition Commission considered whether the sale of Whitbread's Stella Artois license or the divestment of 75 percent of Interbrew's U.K. business would allay its concerns.
With the exception of one member of the reviewing committee, the Commission found there was no way to eliminate competition concerns other than by forcing Interbrew to sell the Bass brewing business.
At present Scottish & Newcastle accounts for about 29 percent of the U.K. beer market, followed by Bass Brewers at 20 percent, Interbrew with 16 percent and Carlsberg with 13 percent, Liston said.
The controlling shareholders of Interbrew, which traces its history to 1366, raised 2.9 billion ($2.5 billion) in last month's initial public offering, Belgium's largest ever.
Bass PLC shares fell 1.3 percent to 735.75 pence in London Wednesday afternoon. 
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Bass
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