Heineken and Carlsberg Secure S&N Acquisition

25/01/08 The boards of Sunrise Acquisitions Limited (BidCo) and Scottish & Newcastle plc have reached agreement on the terms of a recommended cash offer to be made by BidCo, a newly incorporated company jointly owned by Carlsberg A/S and Heineken N.V. for the entire issued and to be issued share capital of S&N.

Under the terms of the Offer, Scheme Shareholders will receive 800 pence in cash for each S&N Share. The Offer will be implemented by way of a court-sanctioned Scheme of Arrangement. The Offer values S&N’s entire existing issued share capital at approximately £7.6 billion and the entire issued and to be issued share capital at approximately £7.8 billion. No final dividend will be payable.

S&N and Carlsberg have agreed to release projected information for BBH for 2008 – 2010 as set out in this announcement. Following completion of the Offer, S&N’s share of BBH, as well as the French, Greek, Chinese and Vietnamese operations will be transferred to Carlsberg. Heineken will continue to hold the remaining businesses, principally the UK and Ireland, Portuguese, Finnish, Belgian, US and Indian operations. The businesses will be separated as soon as possible and in any event within 12 months after the Effective Date.

The Offer has compelling strategic rationale for both Carlsberg and Heineken.

For Carlsberg, it is a transformational transaction which will deliver a major increase in its operational scale and long term growth prospects, resulting in the creation of the world’s fastest growing global beer company. The principal benefits are:
• gaining full control of BBH, Carlsberg’s key growth asset;
• further increasing Carlsberg’s exposure to attractive growth markets;
• enhancing Carlsberg’s position in Western Europe with complementary businesses in France and Greece;
• scale benefits, allowing the generation of significant synergy benefits based on reductions in overheads, implementation of best brewing practices and purchasing savings;
• enhancing Carlsberg’s brand portfolio by adding premium brands with strong local and international potential; and
• expanding Carlsberg’s Asian platform in the attractive Chinese and Vietnamese markets.

For Heineken, the transaction will provide undisputed leadership in Europe and significant opportunities in profitable markets to grow the premium Heineken brand. The principal benefits are:
• the acquisition of excellent platforms for future growth;
• extensive new distribution and portfolio platforms in the UK and other markets to drive premium Heineken brand growth;
• strong, complementary brands with international appeal and potential (Newcastle Brown Ale, Foster’s, Strongbow cider); and
• access to the UK cider market, which is growing at 18.6 per cent. p.a.; leadership positions in key European markets;
•  number 1 in the UK and number 2 positions in the key markets of Portugal, Ireland, Finland and Belgium which are stable, profitable markets;

The Offer is subject to the approval of Heineken and Heineken Holding N.V. shareholders. S&N has received irrevocable undertakings from the controlling family shareholders in respect of all of their own beneficial holdings of Heineken shares and Heineken Holding shares to vote in favour of (or procure the voting in favour of) any such resolutions that may be necessary to approve, effect and implement the Offer by BidCo to be proposed at the Heineken Shareholders’ Meeting and the Heineken Holding Shareholders’ Meeting.

The approval of the European Commission and certain other competition authorities will also be required. Subject to the satisfaction of the Conditions, it is expected that the Scheme will become effective during Q2 2008.

The directors of S&N, who have been so advised by Deutsche Bank, Rothschild and UBS, consider the terms of the Offer to be fair and reasonable. In providing their advice, Deutsche Bank, Rothschild and UBS have taken into account the commercial assessments of the directors of S&N. Accordingly, the directors of S&N intend unanimously to recommend that S&N Shareholders vote in favour of the Scheme and the resolutions at the Court Meeting and the EGM, as the directors have undertaken to do as further described below.

BidCo has received irrevocable undertakings to vote in favour of (or procure the voting in favour of) the Scheme and the resolutions at the Court Meeting and the EGM from the directors of S&N in respect of all of their own beneficial shareholdings of S&N Shares amounting, in aggregate, to 9,531,441 S&N Shares, representing approximately 1.0 per cent. of S&N’s entire existing issued share capital. These undertakings will remain binding in the event of a competing offer being made for S&N.

BidCo has also received an irrevocable undertaking to procure the voting in favour of the Scheme and the resolutions at the Court Meeting and the EGM from Hartwall Capital OY in respect of 86,710,607S&N Shares, representing approximately 9.2 per cent. of S&N’s entire existing issued share capital. This undertaking will lapse if a third party announces, prior to 5 p.m. on the day which is 20 days after the despatch of the Scheme Document, a firm intention to make an offer with a value of not less than 850 pence per S&N Share. The 9,055,859 S&N Shares beneficially owned by Erik Hartwall and Henrik Therman are not included in such undertaking but, as directors of S&N, they have given undertakings in respect of these shares as referred to above.
 
Commenting on the Offer, Jorgen Buhl Rasmussen, President and CEO of Carlsberg, said: “This is a truly transformational transaction for Carlsberg. In a single step we have created the world’s fastest growing global brewer. We now have full control of our destiny in Russia and other BBH territories and I am truly excited about the new opportunities this will present to us.”

Jean-François van Boxmeer, Chairman and CEO of Heineken, said: “This is a significant strategic step for Heineken. It gives us undisputed leadership in Europe and creates significant opportunities in profitable markets to grow the premium Heineken brand. Our proven ability to create value from mature markets coupled with the step-change in revenue growth will drive our future expansion. I look forward to welcoming the Scottish & Newcastle employees into our business and learning from their unique experience and skills.”
 
Sir Brian Stewart, Chairman of S&N, said: “The management and employees of S&N have built a group with strong brands enjoying leading positions in both mature markets in Western Europe and growing emerging markets. These emerging markets include those covered by BBH, the prospects of which shareholders will be better placed to assess as a result of today’s announcement. The S&N Board believes that the Consortium’s offer delivers a fair value for S&N, reflecting its growth prospects, and will be recommending that shareholders accept.”

The Offer of 800 pence per S&N Share represents:
- a premium of 50.7 per cent. to the Closing Price of 531 pence per S&N Share on 28 March 2007, being the date immediately before speculation first arose around a possible offer for S&N;
- a premium of 25.7 per cent. to the Closing Price of 637 pence per S&N Share on 16 October 2007, being the last Business Day prior to Carlsberg and Heineken announcing that they were in discussions regarding the formation of a consortium to make a possible offer for S&N; and
- a multiple of 14.3x S&N's EBITDA for the year ended 31 December 2006.