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Archive for December 2nd, 2007

The Danish business weekly Berlingske Nyhedsmagasin has an analysis on why the attempted takeover of Scottish & Newcastle is necessary for Carlsberg:

Carlsberg has not been active in the game of consolidation that has been going on for decades among the global breweries.

But that is a thing of the past. Carlsberg has, together with Heineken, entered a hostile bid for their partner Scottish & Newcastle to take over the Russian golden egg  Baltic Beverages Holding, BBH.

The Russian beer market grew by six per cent in 2005, ten per cent in 2006 og 17 per cent during the first nine months of 2007. BBH has not only followed this growth, but it has expanded its share of the market. At the same time earnings are up from  20 % in 2005 to 24 5 this year. This is something completely different from the low margins on the largely contracting European markets where both Carlsberg and S&N mainly operate.

This is what has led to Carlsberg and Heineken bidding for S&N – assisted by rumours about the giant SAB Miller being interested in S&N. And this is what can explain the current bid on the level of their earnings over the next 14 years.

BBH is central for both Carlsberg and S&N. For both it is the Russian activity that gives growth. If you remove BBH from the accounts,  the turnover of both Carlsberg and S&N is stagnating. 

For Carlsberg the Russian brewery represents a quarter of the company’s total turnover – but when it comes to earnings, it represents 40 per cent.

If the gamble pays off, leaving Carlsberg as the sole owner of BBH, the growth comet will contribute almost 40 % of Carlsberg’s total turnover and almost 60% of its earnings.

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