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Wednesday, 4 July, 2001, 16:57 GMT 17:57 UK
Interbrew given Bass options
Graphic showing the four different possible remedies
The UK Office of Fair Trading has outlined four ways forward for the Belgian beer company Interbrew if it wants to hang onto Bass Brewers.

The rise and fall of Interbrew in the UK market:

May 2000:
Interbrew buys Whitbread's beer business for 400m

June 2000:
Interbrew buys Bass Brewers for 2.3bn

January 2001:
The government deems the Bass deal anti-competitive and orders the Belgian company to sell.

May 2001:
Interbrew's appeal to the High Court is successful; the court asks the government to reconsider.
In a consultation document, entitled "proposed remedies to Interbrew/Bass Brewers merger" all the four proposals by the fair trading watchdog involved the sale of parts of Interbrew's UK business.

Who the buyers would be depends on what is eventually sold, but likely contenders include Carlsberg-Tetley, South African Breweries and Heineken.

The choice of remedy could re-shape the UK beer industry.

Interbrew's shares rose slightly after traders got the whiff of the four proposals with analysts cautiously optimistic about the final outcome.

"There is a small element of good news here for Interbrew as it does hold out the prospect of Interbrew retaining some of the Bass Brewers business," UBS Warburg's Philip Morrisey said.

Big brands

The key decisions to be made relate to the future ownership of two beer brands: Carling and Stella Artois, both of which are big and profitable.

Interbrew owns both Bass which brews Carling and Whitbread which brews Stella in the UK.

And the Belgian giant is loath to get rid of either.

But given that the UK government and the Competition Commission blocked the combination of Interbrew and Bass Brewers - on the grounds that its 32% market share was anti-competitive - it seems likely that the Belgian giant will have to accept one of these remedies.

  • Bass Brewers remedy

    Under the 'Bass Brewers remedy' to the "adverse competitive effects" of the deal, Interbrew would sell all of Bass Brewers to a buyer approved by the UK Director General (DG).

    We look forward to a fair and speedy resolution of this matter and will work to create a sustainable competitive UK beer market.

    Hugo Powell
    chief executive
    This would leave Bass Brewers and Scottish and Newcastle with a 25% market share each in the UK, while Carlsberg-Tetley would have a 12% share and Interbrew a 10% share.

    This was the remedy originally recommended by the Competition Commission and the DG.

    But Interbrew has repeatedly argued that this would reduce competition and hurt consumers.

  • Carling Brewers remedy

    The 'Carling Brewers remedy' would require Interbrew to sell Carling, which is the leading beer brand in the UK, and break up its Bass Brewers business.

    Interbrew would be allowed to hang on to the Bass Brewers business in Scotland and Northern Ireland, but would have to sell the English operations.

    This would leave Scottish and Newcastle with 25% of the market Carling Brewers with 19%, Interbrew with 15% and Carlsberg-Tetley with 12 percent.

  • International Brewer remedy

    The 'International Brewer remedy' was proposed by Interbrew itself. This remedy would leave the company with a 24% share of the market.

    Designed to strengthen all international brewers with an existing presence in the UK, the 'International' remedy would require Interbrew would sell Bass Brewers in Scotland and Northern Ireland.

    It would also sell several high-profile beer brands; Tennent's, Grolsch, Caffrey's, Worthington and Stones, to an approved buyer.

    Alternatively, the fair trading watchdog said, "some other appropriate brand combination" could be sold instead.

    Carling and Bass Ale would remain part of Interbrew's beer portfolio.

  • Whitbread Brewing Company remedy

    The 'Whitbread Brewing Company remedy' would require the sale of the Whitbread beer business, along with the rights to brew Stella Artois, to an approved buyer.

    The Whitbread business would become a "significantly weaker force than when owned by Interbrew", the OFT said, though it did not specify Interbrew's likely market share under this scenario.

    This too would be bad news for consumers because it would reduce competition, Interbrew believes.

    The Office of Fair Trading wants comments from third parties by 18 July.

    After that date, it will publish its advice to trade and industry minister Patricia Hewitt who will make the final decision.

    "We look forward to a fair and speedy resolution of this matter and will work to create a sustainable competitive UK beer market, serving our consumers and bringing much-needed stability to our employees," said Interbrew chief executive Hugo Powell.

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    See also:

    31 May 01 | Business
    SAB eyes Bass Brewers
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    Interbrew challenges Bass ruling
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