BRITAIN'S biggest brewer, Scottish & Newcastle, is being lined up for acquisition by at least two of its competitors.

With the brewing industry consolidating at a rapid pace, analysts say the company is vulnerable to takeover.

One of the world's largest brewers, SABMiller, and German brewer Anheuser-Busch, are believed to be interested, along with an unnamed investment bank.

One analyst told The Northern Echo: "There is a suggestion that S&N is vulnerable to be taken over, which is no surprise given the pressures the company is under.

"Their profitability in the UK has declined dramatically, partly because of some of the foul-ups they have had in their distribution network.

"The world of brewing is consolidating very rapidly. S&N is highly appealing as it is number one in the UK, number two in Portugal, number one in France and Finland and joint number one in Russia."

The group embarked on a major cost-cutting drive to reduce its 40 distribution depots to three regional centres.

The proposal, planned to save £50m, should have taken four years, but the company warned the City in February that it would be nearer five-and-a-half.

An S&N spokeswoman said the company never commented on speculation.

News of S&N's potential fragility in the market came on the day the company's UK arm Scottish Courage announced it was closing the kegging line at Tyne Brewery.

It is shipping that task across the River Tyne to the Federation Brewery.

The contract will include the kegging of brands including Newcastle Brown Ale, Newcastle Exhibition and McEwan's Best Scotch.

The brewing and bottling of Newcastle Brown and other beers brewed at Scottish Courage's Tyne Brewery will continue unaffected.

The kegging move will cost 26 jobs but the Federation Brewery plans to create ten.

However, it is the strategic importance of the announcement that concerned people in the brewing industry.

Coming on the back of a range of cost-cutting measures by the brewer, fears were voiced for the long-term future of the Tyne Brewery.

One source said: "S&N can see the future with Fosters and John Smiths.

"Maybe, in the fullness of time, if they are trying to get dominance in many markets, Newcastle Brown and Newcastle Brewery could become sidelined.

"It is neither here nor there if you want to be an international player."

Dave Rutherford, manufacturing director at Scottish Courage, said: "Over the last few months, it has become apparent that our kegging operation at Tyne was becoming less viable. Transferring this work to Federation makes good commercial sense and means that we can keep some of the jobs associated with the work in the North-East."