Britain's biggest brewer makes stout stand

London Briefing:When Australian bidders attempted to take over Scottish & Newcastle (S&N) almost 20 years ago, the British brewing firm inverted the labels on its famous Newcastle Brown Ale as part of a punchy campaign to defend its independence.

The rallying cry - "Keep us on top" - did the trick and S&N, then Britain's fifth-largest brewer, saw off the advances of Fosters group Elders IXL.

S&N, now Britain's biggest brewer, is again fighting for its independence against hostile overseas bidders.

Carlsberg of Denmark and Dutch group Heineken certainly chose an opportunistic moment to launch their break-up offer - just after S&N chief executive Tony Froggatt revealed that he was stepping down. His successor John Dunsmore has been in the hot-seat since the start of this month.

S&N has long been a takeover target and the plan behind the joint bid is for Heineken to take on the British operations and part of Europe, while Carlsberg would get France and Greece and would take full control of Baltic Beverages, the Russian brewing operation it owns jointly with S&N.

Having roundly rejected the initial 720p-a-share terms, S&N has also dismissed the increased 750p offer.

S&N believes that Carlsberg is attempting to get control of the fast-growing Baltic operation on the cheap and that the bid with Heineken is designed to circumvent a so-called "shoot-out" agreement between S&N and Carlsberg.

Under the "shoot-out" clause, either one of the joint owners can offer its shares to the other for a named price. If that offer is refused, however, the partner who offered its shares must then buy out the other side at the price it named for its own stake.

The S&N camp believes the Carlsberg-Heineken bid triggers the clause and have called in the lawyers to force the Danish brewer to sell its stake.

S&N's new chief executive has impressed analysts so far with his case for continued independence. Although current trading is lacklustre, Dunsmore made it clear that he is determined to take control of Baltic, bringing in a minority partner if necessary.

The consortium bid implies a value of just over £3 billion (€4.19 billion) for S&N's stake in the Russian brewer, which Dunsmore insists is well short of its value, particularly as profits are roaring ahead by 30 per cent a year. The more Dunsmore talks up the value of Baltic, the greater the cost to buy the business out, assuming the courts agree that the clause has been triggered.

In the end, it will probably serve to force Carlsberg and Heineken to up their terms once again. And an offer closer to 800p a share would probably be enough to persuade S&N shareholders that the British brewer's days of independence have come to an end.

Northern rocks Darling

Only the headline writers are happy as stricken bank Northern Rock lurches deeper into crisis by the day, threatening to bring chancellor Alistair Darling down with it. With prospects of a sale now looking remote, his choices are stark - either nationalise the Newcastle-based mortgage lender or let it go under, with inevitable consequences for its 6,000 employees, its savers and creditors, and its 144,000 shareholders.

Politically, the stakes are huge - the government has lent £24 billion to the bank, a sum none of its would-be bidders is willing to repay. As the Daily Telegraph somewhat emotively pointed out, that is equivalent to 400 new children's hospitals, or £1,000 for every taxpayer.

In heated exchanges in the House of Commons on Monday, Darling refused to guarantee that the public money propping up the bank would be repaid in full. He had previously insisted that the cash would be repaid - and with interest.

Nationalisation might be a drastic step but it would at least give the government control of the bank. On the other hand, it would set an extraordinary precedent for future business failures and severely damage both the reputation of the government and the City of London.

As the headline writers say, Darling is between a Northern Rock and a very hard place indeed.

Fiona Walsh writes for the Guardian newspaper in London