Courage deal is not without risks

Proposals from Scottish & Newcastle for acquiring Courage have taken a long time in coming but the City's appetite for them was none the less enthusiastic for that. It would be a mistake to think this is a done deal, however, or that it is risk-free for S&N. The competition authorities may be dulled to the point of impotence but it is hard to see this merger sailing through completely unscathed.

A good case can be made for further consolidation in brewing which is presently suffering from a severe overcapacity problem. But anything that creates a new collosus with more than 30 per cent of the market, as this would, can hardly expect to escape without a Monopolies and Mergers Commission investigation.

With market share of the new combine rising to 40 per cent in some regions, the very least S&N can expect is enforced divestment of a substantial proportion of the merged company's assets.

Smaller brewers will undoubtedly lose out as a result of this merger and the end result will be to limit diversity and consumer choice. Let's assume, however, that a way of countering competition concerns is found. Even after the deal has charted its way through the regulators, it will be a long haul before shareholders start to enjoy the benefits. Short- term there will be a lot of grief - substantial restructuring costs and a vicious price war as the big three brewers battle it out for market dominance. Whether S&N has both the stomach and the stamina for it remains to be seen.