you're reading...

World’s biggest brewer eyes #SABMiller

James-Brent Styan

Johannesburg – Rumours that the world’s two biggest brewers of beer could merge have been circulating for three years, and resurfaced in the past week.

In the past week foreign analysts said it appeared that the world’s biggest brewer, Anheuser-Busch InBev, had set its sight on SABMiller [JSE:SAB].

The analysts mentioned a value of £30 (R330) per SABMiller share, putting the group’s worth at almost $70bn (about R480bn).

On Friday SABMiller spokesperson Nigel Fairbrass declined to comment.

Local analysts however said that although a merger of the two groups was possible it was unlikely to happen soon.

The two brewers together boast almost 400 beer brands – including Castle, Peroni, Budweiser and Stella Artois.

Rob Forsyth, head of industrials at Investec Asset Management, said mergers such as these made good strategic sense.

When such groups got together there was a great deal of cost saving, which was good for returns and profits.

The two specific groups do not really overlap in the geographic regions where they operate. For that reason, too, a merger would make sense.

But Forsyth said there were considerable problems that would first need to be overcome for a merger to work.

In North America, for instance, where AB Inbev had a strong presence, SABMiller would, for example, first have to sell the MillersCoors brand name.

If this were not done the new entity would own 89% of the North American beer market, and one could not imagine the authorities allowing this.

InBev took over Anheuser-Busch for $52bn (R358bn) in 2008. At the time it was the world’s second-biggest cash transaction.

But the new group still has little exposure in developing markets such as Africa, China and South America.

SABMiller is well positioned in those three markets. It owns, inter alia, the Snow brand in China, one of the biggest brands in that Asian country.

Denis da Silva, the brew master at SABMiller in Cape Town, said the group’s activities in developing countries held great promise, despite some challenges.

Beer margins in China were, for instance, low, so Snow did not necessarily produce the returns that it could, he said. In India, too, problems still existed regarding interprovincial taxes and regulations that constrained beer sales.

SABMiller owns the Italian Peroni brand as well as the Czech beer Pilsner Urquell that it bought in 1999 and which it regards as its crown jewel.

SABMiller has 70 000 employees and AB InBev 116 000.

Cadiz Asset Management analyst Mark Ansley said competition authorities would probably not present a major problem for any proposed merger, other than in North America.

Competition authorities were generally concerned only with their specific regions, he said.

Ansley reckoned AB InBev was not afraid of big transactions or takeovers.

But, he said, the group would have to pay a premium for SABMiller’s shares. At the moment SABMiller was offering good value and a bid would have to be significant.

Forsyth said that if the two merged it would end the competition in the world of beer.

A new group such as that would have restricted exposure only in Western Europe. The rest of the world would be covered.

Forsyth said one possible obstacle might be that AB InBev had insufficient cash to buy SABMiller.




No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

SaleWine lIve

%d bloggers like this: