Scottish & Newcastle plc (“S&N”) announced on October 6 that it has agreed to sell S&N Retail for £2,510 million to focus on international brewing. S&N Retail (pubs, restaurants and lodges business) will be sold to Spirit Amber Bidco, a new company formed by a consortium led by Texas Pacific Group and The Blackstone Group and also comprising CVC Capital Partners and Merrill Lynch Global Private Equity.

The proceeds of the sale will allow S&N to repay most of its debts, a move that should facilitate further expansion in the European beer market. The company is already the market leader in three of the top six beer markets in Europe: namely the UK, France (where it owns Kronenbourg) and Russia (where it operates through Baltic Beverages Holding, a joint venture with Carlsberg), and has strong positions in 11 other countries, including Belgium, Greece and Portugal, where it recently acquired the Centralcer brewery.

It also owns three of the top ten brands in Europe by sales volume - Baltika, Kronenbourg and Foster's.

Tony Froggatt, chief executive of S&N, said the sale of the retail business was a core element of this new brewing-orientated focus. “It will enable us to develop and drive value from our existing European platform, whilst continuing to build on our established positions in other markets where S&N has high potential for organic growth such as Russia, the Ukraine, India and the United States,” he said.

For decades, the British beer market was dominated by a handful of major groups, which both brewed the beer and owned the pubs where it was sold. But the introduction of the Beer Orders in the 1980s, which made it easier for rival beer brands to find their way into pubs owned by competitors, the market began a lengthy process of change.

Two of the three main brewers and pub owners have already disappeared, with both Whitbread and Bass selling off their drinks manufacturing businesses (both, initially, to Interbrew, and then, after the competition authorities complained, to Coors as well) but market leader Scottish & Newcastle continued to maintain the tradition – until now.

For S&N too has finally split its two main business streams, but unlike its rivals, it will retain the brewing business and sell off the pub estate – a clear indication – if any more were needed given the spate of recent brewing acquisitions - of the company’s desire to mix it with the global beer market leaders such as Heineken, Interbrew, SABMiller and Anheuser-Busch.

S&N in fact announced the decision to sell its pub business back in April, since when a number of companies have come forward to bid for the unit, which includes S&N’s managed pubs, restaurants and lodges business. The winner of the bidding auction has today been revealed as Spirit Amber Bidco, a new company formed by a consortium led by venture capital groups Texas Pacific and Blackstone and also comprising CVC Capital Partners and Merrill Lynch Global Private Equity.

S&N said that its managed retail business of over 1,400 pubs, restaurants and lodges would fetch £2.5 billion (€3.6bn), and that the deal also included a seven year agreement for the supply of its brands of beer and cider, at market prices, to the estate. This should ensure that the company does not see any significant decline in its UK volumes.

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