Cloud cast over Bass future as deal falls flat

The British government's refusal to sanction the £2.3 billion sterling (#3.6 billion) takeover of Bass's UK beer operations by Belgian company Interbrew has renewed speculation about the future of the Bass brewery on Glen Road in Belfast, Co Antrim. A Bass spokesman said the firm was disappointed, and local MP Mr Gerry Adams said the decision was the wrong one for the 450 staff who once again faced an uncertain future.

The UK government decided that such a merger would reduce competition in the industry. The deal, which would have brought together some of the UK's best known and best-selling lagers and bitters including Carling, Stella Artois, and Caffrey's, is now off. The British Trade and Industry Secretary, Mr Stephen Byers, has ordered Interbrew to put the Bass breweries back on the market. Interbrew is the world's second largest brewery.

Mr Byers based his decision on reports from the competition commission and the director general of fair trading. He said the deal would have created an "effective duopoly" of Interbrew, which has a 32 per cent market share, and Scottish & Newcastle, with 28 per cent. "It would reduce competition in the market, lead to higher prices for drinkers, and reduce customer choice," he said.

Following Mr Byers's order, the UK's third biggest brewer - Carlsberg-Tetley, which has a 13 per cent market share and previously tried to buy Bass - is a favourite to buy the company.

Bass Ireland had strongly favoured the Interbrew takeover. At the time a spokesman told the Irish News: "It is very exciting to become part of the third biggest brewing operator in the world, and we are viewing the future with optimism."

Bass Ireland spokesman Mr Brian Houston said the decision to halt the purchase was disappointing, but he remained confident a buyer could be found. "Management and employees believe the sale to Interbrew was the best deal for Bass Brewers," said Mr Houston.

"We will now await the outcome of Interbrew's negotiations to divest itself of Bass Brewers."

Interbrew employs 30,000 people worldwide, including 11,000 in the UK, and has breweries in 14 countries. The takeover would have meant the company, which made pre-tax profits of around £145 million last year, would have owned four of the UK's top 10 beer brands, including Carling and Stella Artois, two of the top three.

With up to 450 employees, Bass Ireland is west Belfast's biggest private sector employer. It produces four million pints of beer a week, including the output of Caffrey's ale for the world market. It has distribution depots in Ballymoney, Co Antrim, and Omagh, Co Tyrone, and a Tennent's brewing plant in the Republic. Belfast is the smallest of the six Bass brewing operations but deemed the most efficient and profitable operations in the group, with an annual turnover of about £80 million. As well as its UK brewing operation in Burton-on-Trent, Bass is the second biggest brewer in the Czech Republic and also has a brewing operation in China.

When considering the proposed takeover, the UK authorities considered that the combined strength of Interbrew and UK rival Scottish & Newcastle could give rise to a "harmful duopolistic outcome".

Bass Ireland's chief rival in Northern Ireland is Guinness, which employs around 850 people in its bottling and distribution operations in the city.

Both firms have been involved in the retail side of the business. But Bass sold its eight Northern Ireland pubs last year while Guinness has expanded its Croft Inns network.