Heineken and Carlsberg Increase Their Offer for S&N

15/11/07 Heineken and Carlsberg have made an increased proposal to the Board of Scottish & Newcastle plc under which the Consortium would offer to acquire S&N for 750 pence per share in cash. The Consortium believes it is important that S&N shareholders are fully informed of the merits of the Consortium's Increased Proposal in advance of S&N's trading update on 20 November 2007.
 
Key highlights of the Consortium's Increased Proposal are:

•  a full and fair offer price of 750 pence per share in cash, valuing the group at an equity value of £7.3bn and an enterprise value of  approximately £9.7bn, substantially in excess of the standalone independent value of S&N;

•  an increase of 30 pence per share;

•  a premium of 41% to the share price of 531 pence being the closing price on 28 March 2007 (the date immediately before speculation first arose around a possible offer for S&N);

•  a historic transaction multiple of 13.6x S&N's EBITDA for the year ended 31 December 2006 (materially higher than those paid by S&N for its recent major acquisitions); and

•  a high degree of certainty for S&N shareholders.
 
S&N Board recommendation and limited confirmatory due diligence continue to be pre-conditions.
 
Commenting on the Increased Proposal, Jean-Francois van Boxmeer, Chairman and CEO of Heineken said: "The Increased Proposal represents a very attractive opportunity for S&N shareholders to obtain a price which is materially higher than the standalone value of the group. Heineken will act in a financially disciplined manner in its pursuit of this transaction."
 
Jørgen Buhl Rasmussen, CEO of Carlsberg said: "The Consortium's Increased Proposal of 750 pence per share offers S&N shareholders the opportunity to secure a full and fair price for the entire business.  Carlsberg will only proceed with a transaction if it believes it is in the interests of its shareholders."

Following the S&N Board's cursory dismissal of the Consortium's initial proposal and their refusal to engage in discussions to date, the Consortium has decided to provide details of its increased and full and fair proposal directly to the market.  This will enable S&N shareholders to take this into account when evaluating S&N's current trading and future strategy update on 20 November 2007. 
 
With regard to current trading, the Consortium has noted S&N's statement on the "challenging conditions" across Western Europe in its press release of 7 November 2007.  S&N shareholders are reminded that Western Europe provides the significant majority of S&N's revenues, operating profits and operating cash flows.
 
The Consortium's Increased Proposal represents a 2006 EV / EBITDA multiple of 13.6x for the entire S&N group and compares very favourably to the prices S&N has itself paid to create the group.  S&N acquired Hartwall (including Hartwall's 50% interest in BBH) in 2002 on a historic transaction multiple of 10.1x EBITDA.  In 2003 S&N acquired the Centralcer business in Portugal for a historic transaction multiple of 9.6x EBITDA and in 2000 S&N purchased the Kronenbourg and Alken-Maes operations for a historic transaction multiple of 11.3x EBITDA. 

Under the Increased Proposal, the making of any offer would continue to be subject to certain pre-conditions, all of which are waivable at the discretion of the Consortium, and all of which the Consortium believes to be customary. These pre-conditions continue to include satisfactory confirmatory due diligence, the recommendation of the S&N Board and assurance from the trustees of S&N's UK pension schemes regarding the level of contributions that Heineken would be expected to make going forwards.  The Consortium requires only limited confirmatory due diligence access, in particular for verification of its separation assumptions.
 
The Consortium notes the speculation about a possible sale of Elidis in France.  Whilst this may result in a short term financial gain for S&N, Carlsberg believes that such a divestment may be detrimental to the valuation of the French business.  We would therefore encourage the S&N Board to postpone entering into any binding agreement on such a divestment until Carlsberg has had an opportunity to assess the full implications of such a divestment.
 
Under the Increased Proposal, the economic contributions by Carlsberg and Heineken to Bidco will remain approximately 54% and 46% respectively.
 
The Consortium notes that since the release of the BBH quarterly results on 7 November 2007, S&N has requested that Carlsberg consent to the release of additional forecast financial information relating to BBH over and above the level of information that BBH has historically been comfortable releasing at the time of publication of the Q3 results.  Carlsberg has made clear that it continues to support the level of disclosure which in the past both S&N and Carlsberg had felt was appropriate, ensuring the highest standards of corporate governance and protecting the ongoing interests of the BBH group.  However, subject to obtaining the consent of the BBH Board, Carlsberg has offered to cooperate with S&N in the provision of the necessary BBH information required to prepare and report on a consolidated profit forecast for the S&N Group as a whole for 2007 and 2008.  Whilst the release of a S&N consolidated profit forecast is a matter for the Board of S&N, it would, in the view of Carlsberg, provide substantial further information for the market whilst not jeopardising the interests of BBH.
 
This announcement does not constitute an announcement of a firm intention to make an offer under Rule 2.5 of the Code.  There can be no certainty that any offer will be made even if the pre-conditions referred to above are satisfied or waived. 
 
The Consortium said it looks forward to the opportunity to meet with the S&N Board to progress to announcing a full recommended offer as soon as practicable.