Carlsberg, Heineken move on U.K. brewer - AMY WILSON AND MEERA BHATIA

Carlsberg AS, the biggest Nordic brewer, has teamed up with Heineken NV to make a hostile offer for Scottish & Newcastle PLC, the U.K. maker of Kronenbourg and Foster's lager.

Scottish & Newcastle shares surged 19 per cent, valuing Britain's largest brewer at £7.2-billion ($14.3-billion). Carlsberg would gain control of Baltic Beverages Holding AB, its Russian venture with the Edinburgh-based company, while Heineken would get the U.K. brands.

The approach is "unsolicited and unwelcome," Scottish & Newcastle said. Baltic Beverages, which owns Russia's largest brewer, had £724-million in sales last year and would increase Carlsberg's emerging market profit as Western European growth slows. Larger rival SABMiller PLC agreed to combine its U.S. assets last week with Molson Coors Brewing Co. to cut costs and widen distribution.

"Carlsberg is desperate to get its hands on BBH and control over the biggest-growth part of its business, which has been half-owned," said Bruce Davidson of Blue Oar Securities in London, who has a "sell" rating on Scottish & Newcastle. "The driving force is the need to get into emerging markets."

Any offer is likely to be made in cash, and there's no certainty a bid will proceed, the companies said.

The British company's stock rose 12 per cent in the 12 months before today, partly on speculation that Valby, Denmark-based Carlsberg would bid. Amsterdam-based Heineken, Carlsberg and Scottish and Newcastle are the third-, fourth- and fifth-largest brewers headquartered in Europe, respectively.

Marcel Hooijmaijers of Kepler Landsbanki in Amsterdam said the offer could be more than £8 a share and Carlsberg may have to sell new stock. He said the offer may be worth as much as £10-billion, including £1.9-billion of debt, and Carlsberg may have to contribute £5.4-billion to a bid.

Scottish & Newcastle shares advanced £1.195 to £7.56, the biggest gain since at least 1988. Carlsberg shares climbed 1.7 per cent to 770 kroner ($143) in Copenhagen, and Heineken stock was up 52 cents or 1.1 per cent to €46.49 ($64.40).

The U.K. brewer said it's "confident in its future as an independent group" and urged investors to take no action.

"I am surprised Scottish & Newcastle already rejected it," said Nikolaas Faes, an analyst at Exane BNP Paribas in London. "The share price has come up from below 500 pence. Does the company want it to drop back to that level?"

Heineken would gain the assets elsewhere in Europe, and become the top brewer in the U.K., where Scottish & Newcastle has about 26 per cent of the market.

The SAB-Molson U.S. merger announced last week has spurred speculation Anheuser-Busch Cos. may come under pressure to combine with larger rival InBev NV, uniting the world's two biggest brewers.