Belgians bitter at Interbrew snub

By BBC News Online's Brian Wheeler

The British government's decision to block Interbrew's £2.3bn take-over of Bass has clearly touched a raw nerve in the company's native Belgium.

In an unprecedented move, Belgian economics minister Charles Picque hit out at UK Trade & Industry Secretary Stephen Byers, telling him that the decision will have "particularly prejudicial consequences" for both businesses.

The decision to make an unconditional purchase was a strategic error on a gross scale

Former Interbrew insider

Mr Picque said he regretted that approval with certain conditions could not have been made.

Former European Competition Commissioner Karel van Miert also weighed in, telling Belgian newspaper Le Soir that the British government's blocking of the deal was "disproportionate".

National institution

Belgian national pride has clearly been dented by the UK government's snub.

Interbrew is not only one of Belgium's largest companies, but one of a tiny handful with truly global reach.

Its board has traditionally included members of the country's nobility and powerful political figures such as current chairman, and former cabinet minister, Paul De Keermaeker.

Company profile - Interbrew

Formed in 1987, but traces origins to 1366

World's second largest brewer

Owns brands such as Boddingtons, Dos Equis, Jupiler, Labatt, Rolling Rock, Stella Artois

Interbrew's $3bn stock market flotation last year was meant to further strengthen its position at the top table of world brewing, funding an ambitious round of acquisitions.

But that strategy has been thrown into doubt by the British government's ruling, a sentiment reflected in the company's share price, which lost 20% when the news broke on Wednesday.

The underlying suggestion was that the British government was acting to preserve choice for the beer drinker will also have stung Interbrew, which styles itself the "the world's local brewer", and has a proud record of producing speciality beers.

'Punch on the nose'

Worse, however, is the financial cost, with some analysts predicting that Interbrew could lose as much as £600m when it finally comes to sell the Bass business.

A former Interbrew insider says: "To lose that kind of money will have a major impact... The Belgians pride themselves on having one of the world's largest breweries.

"It is a real punch on the nose for them."

Analysts have questioned the wisdom of Interbrew's decision to make an unconditional offer for Bass Brewers, before regulatory clearance had been gained.

"The decision to make an unconditional purchase was a strategic error on a gross scale," the former insider says.

Company profile - Bass Brewers

Founded in 1777 in Burton upon Trent

Boasts UK's oldest registered trademark (1876)

From 1967-1995 UK's largest brewer

Owns Bass, Hooch, Caffrey's, Carling, Grolsch (in UK), Tennents and Worthington brands

"Bass have got the money in the bank and now Interbrew are in the position of having to make a forced sale."

He adds: "I think they are guilty of a certain naivety. They obviously expected clearance to be a formality and it wasn't."

Interbrew's decision to press ahead with the Bass deal when, even on the most generous estimate, its new British portfolio easily outstripped the generally accepted limit of a 30% market share, is also under question.

Many in the brewing industry estimate said the actual share of the combined Whitbread and Bass portfolio - which included top-selling premium lager Stella Artois, Carling, Tennents, Caffrey's and Murphy's stout, was 38%.

Slim chances of success

Interbrew has said the British government's ruling "defies logic" and was "clearly disproportionate to the competition issues at stake" although it has not said whether it will appeal.

Leaders in the UK beer market

Interbrew (including Bass): 32%

Scottish & Newcastle: 28%

Carlsberg-Tetley: 13%

Legal experts have said the Belgian company had very little chance of overturning the decision.

So far, no decision on a merger by a British minister has been overturned in the courts. Some 11 previous appeals in merger cases have all failed.

If Interbrew did decide to appeal, it would focus on whether the ruling was "reasonable" and proportionate to the perceived narrowing of competition.