Britain today told Belgian brewing giant Interbrew to sell the British breweries it bought in August from Britain's Bass for £2.3 billion sterling (euro 3.65 billion), delivering a bitter blow to the maker of Stella Artois.
In a shock decision which ranks among the Britain's toughest competition rulings, the Labour government ruled that the deal was against the public interest and said Interbrew must now sell the business to an approved buyer.
Britain's trade and industry secretary Mr Stephen Byers, acting on advice from the country's competition watchdog, said the deal would have led to higher beer prices and an effective duopoly with Britain's biggest brewer, Scottish & Newcastle.
Interbrew stock slipped over 20 per cent on the news - which was worse than even some industry analysts' worst-case scenarios and came as a cold slap in the face for the brewer's management.
The recently listed company had agreed - unwisely in hindsight - not to make the Bass transaction conditional on British government approval. Interbrew said today it was reviewing the government's decision.
The British government suggested Interbrew would have little trouble finding a buyer for Bass Brewers and said a number of international brewers would find it an attractive vehicle for entry or expansion into the key British market.
Danish rival Carlsberg is seen as the likeliest contenders to take the business off Interbrew's hands.
Carlsberg's British brewing arm, Carlsberg-Tetley, said it was still interested in the Bass assets but at the right price, valuing them at up to £1.5 billion sterling.
Carlsberg-Tetley's new chief executive, Mr Colin Povey, also said that his firm would extract more synergies from the Bass business than any other bidder.
But some analysts said Interbrew, which had never really convinced the market of the deal's merits, was likely to have to book a hefty loss on the sale of Bass Brewers. One research house estimated Interbrew would lose about euro 750 million if it was forced to divest.
If the deal had been approved, Interbrew, now the world's second largest brewer after Anheuser-Busch, would have commanded a 32 per cent British market share. Scottish and Newcastle has 28 per cent and Carlsberg-Tetley, owned by Carlsberg, 13 per cent.
Bass shares were virtually unruffled by the announcement, trading down one per cent, though the government's move throws uncertainty over the future of a five-year beer supply contract Interbrew has with Bass's 3,000 pubs.
"We won't be seeing any reaction on the Bass side, as they have basically sold out, leaving Interbrew holding the baby," said one London dealer.
Reuters