India's United Breweries has suggested close distribution ties with Heineken following the takeover offer by the Dutch brewer and Carlsberg for Scottish & Newcastle, which owns a stake in UB.
As part of the pound 7.8bn ($15.5bn) deal, recommended by S&N last week, Heineken will assume the UK-based company's 37.5 per cent stake in UB and, under local law, the move could trigger an open offer for a further 20 per cent stake.
Vijay Mallya, UB's controlling shareholder, also controls 37.5 per cent of the company, meaning any open offer by Heineken could lead to a takeover battle for the Indian group.
However, UB is taking a friendly stance. "In terms of global distribution of Kingfisher (UB's flagship beer brand) and the introduction of some of their brands in India - that is something we could look at," said AKR Nedungadi, president and chief financial officer of UB.
Access to the extensive distribution networks of the Indian brewer, whose Kingfisher brand is found across the country, would be a coup for Heineken.
Distribution is fiendishly complicated in India's beer market because laws governing alcoholic beverages vary from state to state and liquor and beer are subject to complex government duties and charges.
Heineken is faced with choosing whether it wants to use the Indian group's networks in co-operation with Mr Mallya, one of India's most colourful and prominent tycoons, or whether it wants to try to launch a takeover.
Any attempt at a hostile takeover of UB, one of the cash cows of Mr Mallya's extensive business empire, would be almost unprecedented in India, where the country's tradition of strong controlling family shareholders make such actions difficult.
"Mallya will certainly put on the war paint and get on a horse and come and fight," said one analyst with a research consultancy.
Under Indian law, the acquisition of more than 15 per cent of a company usually automatically triggers an open offer for a further 20 per cent.
But, subject to discretion from the regulators, the law grants exemptions for takeovers or mergers that are done under a court-approved scheme of arrangement.
The exemption also often applies to deals done overseas using foreign schemes of arrangement. The Heineken takeover of S&N is following a scheme of arrangement format though whether this will meet the requirements of Indian law will depend on the details.
The other variable in the deal is whether or not S&N had contractual obligations with UB that prohibited it from increasing the size of its stake.
Under the terms of the S&N deal, Carlsberg will take control of Baltic Beverage Holdings, its Russian joint venture with S&N, as well as the French, Greek and Chinese operations. Heineken will take control of the UK, the US, India and S&N's other European markets.
