S&N is the largest UK-owned brewer

Shares in S&N, whose brands include Fosters and Kronenbourg, closed more than 1% higher on Friday after closing 12% ahead on Thursday.

Despite the rumours, analysts were divided on whether any bid for S&N from the Dutch company would be forthcoming.

Both firms have declined to comment on the takeover speculation.

Anti-competition issues

Some brewing industry analysts said Edinburgh-based S&N was vulnerable to takeover as it did not have a big controlling shareholder.

Check S&N's share price

But others said Heineken might be put off by the possibility that, if they make a bid, such a deal may come under close examination by competition regulators, especially in France where both companies dominate.

Other commentators speculated whether Danish brewer Carlsberg would be a better fit for S&N, and that the two could potentially look to merge in the future.

Some of S&N's other well known brands include Newcastle Brown Ale, John Smith's, and cider Strongbow.

Last month it said it was looking to make �50m of cost savings over the next three years. The announcement came as it announced that its 2006 pre-tax profits were up 14% to �452m.