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S&N or S&M?

• Robert Peston
• 18 Oct 07, 10:00 AM

There are times when the non-executive directors of a company have to decide what鈥檚 in the interests of shareholders, in a way that can seem patronising and out of touch with what those investors are thinking.

But even if you accept that investors don鈥檛 always know what鈥檚 good for them, it was surprising to read from the UK鈥檚 last remaining independent brewer of any size, , that a 鈥減roposed break-up bid from Heineken and Carlsberg鈥� is unsolicited and unwelcome鈥�.

and have indicated (and will firm this up in a few days) that they want to pay well over 拢7 for something that yesterday morning was trading in the market at nearer 拢6. And yet that odd couple from the Continent was told to hop off in no uncertain terms.

Few companies have reacted with such hostility to a putative bid since I was a cub reporter in the 1980s. That was the bad old days of boards being almost wholly detached from the interests of their owners. It was a rather depressing time of managerial capitalism, when directors behaved like oligarchs accountable to almost no one.

Make no mistake, I can see why the executives of a company may not be ecstatic that their company could fall into new ownership. Even if they keep their jobs, they would probably find themselves rather lower down the food chain in an enlarged group.

What鈥檚 more, it is natural for their employees to be anxious.

And all of us should be fearful about the implications for the economy 鈥� the national economy and local ones 鈥� if new owners were to curtail investment or even cut back production.

Also, we should feel a bit nervous that another brick in the foundations of the British economy may well end up in overseas hands 鈥� and wonder again whether it matters that the ownership structure of Heineken and Carlsberg makes it harder for any bidder to take over one or both of them.

In Scotland and the North East, where S&N has its roots and residual operations, there will be particular concern about all this. If there were any doubt about the sustainability of S&N鈥檚 plant in Gateshead, that would unsettle a part of the UK whose confidence has already been dented by the Northern Rock debacle.

That said, it would be slightly odd for S&N to play the nationality card. In the past, it closed down totemic breweries in and . And of its 37,000 employees in directly owned businesses, joint ventures and investments, only around 4,500 are in the UK. It has interests all over Western Europe, Eastern Europe and Asia.

So will the board鈥檚 furious reaction to Heineken鈥檚 and Carlsberg鈥檚 ambitions lessen the potential damage 鈥� if there be any 鈥� to British economic interests?

That鈥檚 doubtful.

In fact shareholders are now more likely to put explicit pressure on the board to resist whatever temptation they may feel to stand in the way of a proper takeover offer.

Or to put it another way, the aggression of the board may well rebound on itself.

Brewing is a global, consolidating industry. Other big drinks businesses, and especially , won鈥檛 want to see Heineken and Carlsberg snatch S&N鈥檚 desirable brew and will be weighing possible offers of their own.

S&N is 鈥渋n play鈥�, to use the ghastly City expression. And, almost as a law of nature, it will now be taken over.

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