Consolidation fever has swept through the UK's brewing sector after European giants Carlsberg and Heineken confirmed they were launching a bid for Scottish & Newcastle (S&N).
A deal would see Dutch brewer Heineken take over S&N's UK operations.
News of the possible bid, which may come as early as next week, saw S&N's share price rocket more than 20 per cent as the City digested the announcement.
Clearly stung by what it saw as a betrayal by Carlsberg, its partner in the East European Baltic Beverage Holdings (BBH), S&N slammed the announcement as "unsolicited and unwelcome".
"S&N is confident in its future as an independent group with a combination of strong growth in emerging markets and cash generation in developed markets," it said. The board of S&N "strongly urges shareholders to take no action at this time".
One City insider close to the situation said: "Carlsberg has behaved disgracefully over this. First they were going round telling people it wasn't going to happen, that the numbers didn't stack up, and now this."
Diageo and SABMiller have already been linked with possible bids for rival S&N, but if Carlsberg and Heineken's move succeeds the pair have already laid out their plans for how they would carve up S&N's assets.
It was "currently intended that Carlsberg will ultimately acquire S&N's interest in BBH, France and Greece, and that Heineken will ultimately assume control of S&N's business in the UK and other European markets", the pair said.
For several months speculation has been mounting that Danish brewer Carlsberg was looking to buy S&N's 50 per cent share of BBH, or even launch a bid for the group itself, although S&N had been quick to scotch such talk. Echoing this, analyst Mark Brumby of Blue Oar Securities said the first indications would appear to be that new S&N chief executive John Dunsmore, who takes over on November 1, was "not yet prepared to hand over the keys".
"While the price at which S&N's shares are currently trading in the market has some downside risk should the potential bid evaporate, it looks at this stage as though shareholders should hang on," he said.
The City reckons £8 a share, valuing S&N at just shy of £8bn, is the least shareholders would demand.
Another question raised by the bid if successful, would be the role of Carlsberg in the UK - and whether it would completely pull out, or continue to run its wholesale business.
If not it would leave several pub companies, including Punch Taverns, looking for another wholesaler which might cause consolidation - leading to potential competition issues.
No talks had yet taken place between any of the parties, although The Publican understands that an official approach might be launched in a matter of days.
The Drinks Editor:
So what is in it for all parties? For Heineken, which would end up controlling S&N's brands in the UK, it's a deal that would give it access to a distribution network totally beyond it since its re-launch. The addition of Heineken and Amstel to S&N's powerhouse portfolio would make a potent package.
For Carlsberg, a deal might add to the gossip that it is looking for an exit strategy from the UK. And it would give the company total control of Baltic Beverage Holdings - perhaps it has found it hard to share something quite so enticing.
But surely S&N will rebuff any approach? Industry mutterings suggest we shouldn't be so sure. Indications are that the numbers coming from S&N's freetrade accounts since the smoking ban are not good. Perhaps there is no longer room for four big national brewers. Someone has to go and if the price is right…
Adam Withrington