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Friday, 26 January, 2001, 11:35 GMT
Interbrew challenges Bass ruling
Crates of Stella Artois in a supermarket
Interbrew: Ruling "disproportionate" and "inflexible"
Interbrew, the Belgian brewer of Stella Artois, is to appeal against the decision by the UK government to block its 2.3bn proposed takeover of Bass's brewing interests.

In a statement, the company said: "Based on extensive legal advice, Interbrew will seek a judicial review of the decision in the English courts."

The UK government had ruled that Interbrew should sell Bass Brewers.

But Interbrew said this was "significantly disproportionate" to any adverse effects of the deal for consumers and was "unnecessarily inflexible".

The UK's Trade & Industry secretary Stephen Byers had ruled that a combined Interbrew/Bass Brewers would be bad for the UK's beer drinkers as it would give the group a market share of about 32% and create a duopoly with rival Scottish & Newcastle.

Higher prices for consumers might result, he decided.

Chief executive under fire

Interbrew said it would take a one-off non-cash charge of 1.2bn euros (760m) against its 2000 financial results to cover the potential consequences of Mr Byers' ruling.

"Although we have taken action to put the financial consequences of the Secretary of State's decision behind us, Interbrew will continue to explore all commercial and legal opportunities with a view to balancing the desire to conclude these matters quickly with the goal of achieving the best possible outcome for Interbrew's stakeholders," chief executive Hugo Powell said in a statement.

Dividends to shareholders will not be affected.

Mr Powell has himself come under fire from shareholders for not foreseeing problems over the Bass acquisition.

He decided to push ahead with Interbrew's flotation on Belgium's Euronext stock market before UK authorities had said whether they would clear the Bass deal.

The decision to block it caused Interbrew's share price to drop more than 20% on 3 January.

Since then, it has dipped further to stand at 27.35 euros at 1056 GMT on Friday, some 27% down on its lifetime high.

Interbrew said in its statement on Friday that the board of directors retained their confidence in Mr Powell.

No decision overturned

Some legal experts said Interbrew 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. Eleven previous appeals in merger cases have all failed.

The case will focus on whether the ruling was "reasonable" and proportionate to the perceived narrowing of competition, legal experts said.

Interbrew said that if the ruling stood, it would seek more time to sell off assets.

Mr Byers had said Interbrew should sell Bass within six months.

"If we get two years, we would be very pleased. If we obtain something in between (six months and two years) it would surely be better than six months," Mr Powell said.

Low bids

Analysts said a forced sale within such a short period would encourage prospective buyers to bid low.

Some said Interbrew would do well to get 2bn for Bass - about 300m less than it had paid for it.

A further possibility is that Interbrew would seek to hang on to Bass and sell its Whitbread brewing operations - also bought last year - instead.

Speculation about possible buyers for Bass centred on Dutch giant Heineken, Carlsberg-Tetley - the UK's number three brewer - and South African Breweries, which has itself been the subject of merger rumours.

'Uncomfortably short'

Mr Powell on Friday said the list of candidates was "uncomfortably short" and he wanted more time to plough fresh investment into Bass to make it more attractive to a buyer.

In the meantime, Interbrew and Bass would operate as separate companies, he said.

Interbrew/Bass would bring together many of the UK's best known and best selling lagers and bitters, including Carling, Stella Artois, Boddingtons, Worthington and Caffrey's.

Analysts said jobs might also have been a factor in the government's decision to block the takeover, as the deal was expected to lead to the closure of a number of UK breweries.

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See also:

05 Jan 01 | Business
Belgians bitter at Interbrew snub
04 Jan 01 | Business
Belgium slams blocking of Bass deal
01 Dec 00 | Business
Interbrew shares rise on debut
08 Nov 00 | Business
Interbrew to go public
03 Jan 01 | Business
Bass takeover blocked
03 Jan 01 | Business
What now for Bass beer brands?
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