Analyst calls for 6C and Anheuser to break up S&N

A top analyst from WestLB Panmure has called for Scottish & Newcastle, Britain's biggest brewer, to be broken up through a hostile takeover.

Beverages analyst Stuart Price called on the world's number one brewer Anheuser-Busch to combine forces with hotel and pub group Six Continents, to take apart S&N.

The bold plan would see Anheuser-Busch, the US maker of Budweiser, buy the business outright and sell the pubs division on to Six Continents.

Six Continents would then merge its 2,000 managed houses with S&N's 1,500 to create a managed giant that would then be floated-off on the stock market.

The two companies were in talks earlier this year but S&N walked away, preferring to retain the pubs as an avenue for its beers.

The Scottish brewer is thought to be in talks with various financial institutions over the sale of 1,000 pubs. It would sell the freeholds but retain operational control.

Last week it was reported S&N was in talks with Royal Bank of Scotland.

Mr Price argued that a tie-up with Six Continents was too compelling and that S&N would not be able to extract as much value with a sale to a property partner.

The brewer would raise £1.2bn for 1,000 pubs but without all the synergies that a deal with Six Continents would bring, he said.

The book value of S&N's pubs is £2.1bn, meaning the group would have to get £900m for its remaining 500 pubs.

Mr Price said another reason why shareholders should support the move is S&N's worrying use of sale proceeds. "It either overpays fro brewing assets, like Kronenbourg, or invests in emerging markets," he said.

Anheuser would make savings of £145m and benefit from greater distribution of Budweiser in Europe and Russia, said Mr Price.