Scottish & Newcastle; the last of the big UK brewers

It's perfectly possible to envisage in years to come Carlsberg and Heineken's bid for Scottish & Newcastle (S&N) finding its way onto the case study list of UK business schools.

The four month-long £7.6bn takeover battle for the UK's largest brewer certainly had the makings of a Shakespearean bloodfest: a newly-anointed king thrust into the frontline of a battle to save his empire from a partner-turned-adversary, and although ultimately defeated, becoming a victor of sorts, with the vanquishers forced to pay a high price for their sought-after prize.

While bid rumours had circled the group for some time, that a move finally came from Carlsberg, S&N's partner in Eastern European brewing operation Baltic Beverage Holdings (BBH), surprised many. S&N took an extremely dim view of Carlsberg teaming up with Dutch brewer Heineken to launch a bid against an established business partner.

Given the financial resources available to both groups even in the early skirmishes of the takeover campaign few in the City seriously doubted the pair would fail to capture S&N if they wanted it badly enough. But S&N held out for the maximum price possible and while shareholders' nerves were certainly tested, those of the UK brewer held firm.

Key in S&N's defensive arsenal was group chief executive John Dunsmore, an S&N lifer who had been appointed to the top job a mere 20 days before the balloon went up.

Quickly into the breach, Dunsmore did little to hide his contempt for the initial approach of 720p a share, stressing time and again the realisation of shareholder value based on the group's true worth. There would be "no emotional constraint" regarding the group's future, he said. That meant being open to a bid at the right price, or seeing off a bid altogether and gaining full control of the potential goldmine that is BBH.

Against a background of looming legal battles, Takeover Panel involvement and a sense that not all shareholders were happy to hold out for 800p a share, Dunsmore held out. After a series of raised bids S&N finally agreed to open its books on the basis of an £8 offer on the table. Barely a week later and an agreement was reached.

S&N denies any suggestion that the group indulged in brinkmanship throughout the four-month battle - "John didn't need to do that," said a spokesman. "You only do the brinkmanship thing [over S&N's legal position on BBH] if you're bluffing. And we weren't bluffing."

And now a new era beckons S&N and its management. Few expect Dunsmore to be short of offers, should Heineken decide to dispense with his services in the coming weeks.

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What happens now?

Each of the three companies must convene an extraordinary general meeting to gain shareholder approval for the deal. Politicians and the competition authorities will doubtless take up the issue, though few expect any serious hurdles here. The deal, once approved, is expected to complete sometime in April.

Heineken will then take control of S&N's UK and Irish operations, as well as businesses in Portugal, India, Belgium, Finland and the US. Carlsberg assumes full control of BBH and takes over S&N's French business and others.

With less than one per cent of the UK beer market Heineken has ample scope to widen its reach following the deal's completion. Jean-François van Boxmeer, Heineken's chief executive, is "very excited" about the potential afforded by S&N's pub business, Scottish & Newcastle Pub Enterprises (S&NPE). With S&NPE accounting for around 15 per cent of S&N's annual profits and given the new-found bar space for its Heineken and Amstel brands, hanging onto the retail arm is understandable. As for S&N's leading brands - Foster's, John Smith's, Kronenbourg 1664 and Strongbow - these are safe, according to van Boxmeer. Heineken is meanwhile chomping at the bit to get stuck into the cider market.

On the question of redundancies, jobs will almost certainly go at S&N's corporate headquarters on St Andrew Square in Edinburgh and possibly elsewhere, but there are currently few details. Some observers meanwhile suggest the deal will trigger a rejig of the relationship between beer producer and the pub operator, with the latter ceasing to have quite the upper hand it has been used to. Others disagree, arguing a new-look Heineken-owned S&N is hardly likely to play hardball with pubs while it tries to increase its presence in supermarkets.

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Countdown to a takeover

September 10, 2007:​ S&N denies suggestions of a rift with Carlsberg, its partner in BBH, following reports the Danish group wants to buy out S&N's share in the Eastern European brewing operation

September 27:​ John Dunsmore appointed CEO, S&N. He is to take up his new role in November

October 17:​ S&N slams bid interest from Carlsberg, its partner in BBH, as "unsolicited and unwelcome"

October 25:​ S&N rejects Carlsberg/Heineken's indicative bid of 720p a share, which values the UK group at £6.8bn

November 4:​ S&N creates 'star chamber' to oversee defence against Carlsberg/Heineken

November 14: ​Carlsberg/Heineken raise their offer to 750p a share

November 15: ​Carlsberg does not rule out going hostile on S&N, but stresses it wants to "engage" with the UK group. S&N rejects a raised offer of 780p a share

November 20:​ Chairing his first press conference since becoming S&N chief executive, John Dunsmore says his mother could table a better offer for BBH than his company's potential acquirers

November 23:​ S&N claims Carlsberg is in breach of its BBH shareholder agreement, a charge Carlsberg refutes

December 5:​ S&N welcomes the appointment of a chairman to oversee its BBH arbitration case against Carlsberg

December 17: ​Takeover Panel rules Carlsberg/Heineken must 'put up or shut up' by January 21. Carlsberg remains confident it can engage with S&N

January 2, 2008:​ S&N says it will take a "thumping great offer" to get it to the negotiating table

January 17: ​S&N agrees to open talks with Carlsberg/Heineken as an 800p a share offer looms

January 21:​ Takeover Panel extends its deadline to January 24. This is itself extended another 24 hours

January 25:​ S&N announces it has agreed terms with Carlsberg/Heineken to sell the business for 800p a share, valuing the group at £7.6bn.