For Peter Kennerley, the demise of the UK’s largest brewer, Scottish & Newcastle (S&N), inspires a mix of emotions. “We hoped it would have a strong independent future, and of course on one level I am personally sad,” he says.
It has been a long journey for S&N’s company secretary and general counsel of nine years. Kennerley was right at the heart of the company’s three-month-long £7.8bn takeover battle with a consortium made up of Danish brewer Carlsberg and Dutch brewer Heineken.
S&N’s aggressive defence caused the consortium to raise and re-raise its bids from the initial 720p per share (as reported on thelawyer.com, 18 October 2007), to a sweetened 750p, then 780p, and finally to a whopping £8 – gifting S&N shareholders an additional £800m in the process (as reported on 28 January).
It was akin to a risky game of corporate chess, played out in the public eye, at times criticised as a gamble by shareholders and analysts and all set against the backdrop of large M&A activity and cheap credit drying up.
“The offer worked outside the formal framework of the takeover code,” explains Kennerley. “The consortium’s offer was leaked, and because of the leak negotiations were pretty much conducted publicly.”
He adds that leaks and virtual offers are becoming increasingly common in takeovers for PLCs in a strategy that was popularised by private equity.
Kennerley is no stranger to takeovers, although until recently he had acted mostly as the predator – the last approach to S&N’s vulnerable open share register was made around 15 years ago by Fosters. After nearly a decade at S&N, Kennerley reckons he has steered through more than seven major acquisitions and investments. These range from the purchase of Greenalls’ pubs and restaurants for £1.1bn in 1999, to the purchase of the Kronenbourg, Fosters and Bulmers, plus Indian and Finnish beverage brands. In that time S&N also disposed of Center Parcs and sold S&N’s pub business in 2003 after even heavier regulation of the UK brewing industry kicked in.
“The global beer market was beginning to consolidate and we were transforming from a UK-based brewer and pub owner into an international brewer,” says Kennerley of his first few years in the job.
It was ultimately S&N’s international business – in particular Russia’s largest brewer, Baltic Beverages Holding (BBH) – that sparked the most interest from Carlsberg and Heineken, combined with S&N’s demise as an independent into the international sphere.
Kennerley refers to BBH as the “jewel in the crown” that first attracted Carlsberg. But BBH was soon to turn into a legal bargaining chip in S&N’s takeover defence.
Carlsberg and S&N had been running BBH as a joint venture (JV), but with the takeover bid Carlsberg hoped to bag the entire operation, which promised a rosy future in the booming Russian and eastern European beverage markets.
S&N, however, commenced Swedish arbitration proceedings against Carlsberg, arguing that the Danish brewer’s approach had breached the terms of the JV (as reported on thelawyer.com, 22 November 2007).
Carlsberg defended itself by claiming that it was not a party to the arbitration agreement, but the case could have stretched on for more than six months. With added pressure from the Takeover Panel’s “put up or shut up” deadline that was requested by S&N, this could have left the consortium’s bid floundering.
For the arbitration, Kennerley had drafted in a local Swedish arbitration expert over S&N’s stalwart M&A adviser, Linklaters. His strategy in the move was to divide the transactional M&A aspects from the separate arbitration so that each could progress independently.
Two months later the 800p cash bid from the consortium rolled in at a premium of 26 per cent after the S&N board had made clear it would not sit down to talk for less.
With the takeover as good as wrapped up, S&N’s global empire is now being divided between the consortium. Heineken will absorb the UK operations and legal function and Kennerley’s role as company secretary and group general counsel will cease to exist, but he will continue to oversee the transition for up to three months (as reported in The Lawyer, 7 May).
His job can not have been an easy one, especially amid the pressure the board faced as it rejected bid after bid from the consortium.
“When we said we wouldn’t accept the [consortium’s] price we were accused of protecting our own interests and jobs,” says Kennerley. “But we were acting in the best interests of the shareholders.”
Indeed, any such accusations now fall by the wayside as the proof lies in the pudding. No matter what the board and Kennerley’s feelings may have been, their defence of S&N is likely to live on as a textbook case of maximising shareholder value.
Name: Peter Kennerley
Company: Scottish & Newcastle
Position: Company secretary and general counsel
Industry: Beer and other beverages
Reporting to: Chief executive John Dunsmore, chairman Sir Brian Stewart
Number of employees: 13,600
Total legal capacity: 20
Annual legal spend: £7m-£8m
Main external law firms: Freshfields Bruckhaus Deringer, Hammarskiöld, Kimbell & Co, LG, Linklaters, Morton Fraser, Shepherd and Wedderburn
Peter Kennerley’s CV
Education:1975: Cambridge University
1979: College of Law, Guildford
Employment:1979-81: Articled clerk, Simmons & Simmons
1981-86: Solicitor, Simmons & Simmons
1986-88: Secretary, Takeover Panel
1988-99: Partner, Simmons & Simmons
1999-2008: Company secretary and general counsel, Scottish & Newcastle