Denmark: Carlsberg could raise $12.7 bln by making a major beer acquisition

Danish brewing giant Carlsberg A/S said on June 26 it was likely to make a major beer acquisition and could raise as much as 70 billion Danish crowns ($12.7 billion) for such a deal, according to Reuters.

"A major deal is likely. Carlsberg has the strength to become bigger," Chairman Povl Krogsgaard-Larsen told Reuters in an interview following the surprise announcement last week that the group's chief executive was departing.

The world's fifth-largest brewer, which makes Carlsberg, Tuborg, Holsten and Baltika beers, is permitted to raise more equity following a change last month in the statutes of its controlling shareholder, the Carlsberg Foundation charity.

Krogsgaard-Larsen said Carlsberg was an intermediate-size brewer along with Scottish & Newcastle Plc and Molson Coors. This, he said, put pressure on the group to do deals so it could compete with the world's top brewers including InBev and SABMiller Plc.

Carlsberg shares ended up 0.61 percent at 659 crowns, while S&N closed 1.6 percent higher at 650.5 pence as analysts contemplated a possible Carlsberg bid for its Edinburgh-based rival.

Carlsberg Chief Executive Nils Smedegaard Andersen, who is set to resign after third-quarter results on Nov. 7, said the company could raise both equity and debt. Last week, Andersen, 48, was appointed head of Danish shipping group A.P. Moeller-Maersk from Dec. 1.

"We could probably raise 40 to 50 billion crowns as equity and some 20 billion crowns as debt, but we have no concrete plans to do acquisitions," Andersen said in another interview.

Andersen said the change in the Foundation statutes meant the group could make large acquisitions or potentially buy out the rest of its Eastern European joint venture if the opportunity arose due to a so-called "shoot-out" clause.

NO SHOOT-OUT INTENTION

Carlsberg and S&N jointly own Baltic Beverages Holding (BBH). Under the shoot-out clause, if one partner offers its 50 percent share to the other at a set price and the latter declines, then the first has the right to buy the other partner out at the same price.

Krogsgaard-Larsen added, "We have no intention to take this pistol out of the drawer."

The Carlsberg Foundation got the go-ahead in May to cut its stake in Carlsberg to "more than" 25 percent from 51 percent currently, while still holding 51 percent of the voting rights.

Analysts said the move would allow Carlsberg to double its current equity of a little more than $10 billion. It also heightened talk the company may look to bid for its long-time partner S&N, which brews Foster's and Kronenbourg in Europe.

Andersen said a move for S&N was "not inevitable".

Carlsberg and S&N both rely heavily on low-growth northwest European beer markets, so a merger could allow a combined group to cut costs and focus on big-growth beer markets such as Russia through BBH, analysts said.

Analysts say a S&N deal may be delayed until a new chief executive is appointed, and some say Carlsberg may move quickly to appoint finance director Jorn Jensen as its new chief executive. Merrill Lynch analysts said a takeover by Carlsberg of S&N seems inevitable based on potential cost savings, regional scale and a simplified ownership structure of BBH.

The broker estimates a deal would bring annual cost savings of 114 million pounds and enhance Carlsberg's earnings by 20 percent, at a S&N share price of 700p.

But a link-up would cause regulatory problems in Britain, Portugal and Finland, analysts said. Krogsgaard-Larsen said he would be surprised if a new chief executive was not named by the end of September and added that the new appointment was "very likely" to be a Danish person.

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