Mega brewing merger presents opportunities, perils for rivals

Thu Sep 17, 2015 12:35pm EDT
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By Philip Blenkinsop and Martinne Geller

BRUSSELS/LONDON (Reuters) - A tie-up of brewing giants Anheuser-Busch InBev (ABI.BR: Quote) and SABMiller SAB.L would reset the global brewing industry, allowing a fierce competitor to extend its lead and ringing last call for smaller rivals to snap up meaningful assets.

World leader AB InBev said on Wednesday it had approached SABMiller's board regarding a friendly combination that would marry its Budweiser, Stella Artois and Corona beers with SABMiller brands like Peroni, Grolsch and Pilsner Urquell.

A deal, likely worth over $100 billion, would be complicated and among the biggest in corporate history as well as the crowning achievement of the Brazilian financiers behind private equity firm 3G Capital, known for ruthless cost-cutting and high profit margins enabling them to play extra hard against rivals.

"If this deal goes ahead, there will really be one global beer company. The sector will be pretty much done," said Ian Liddle, chief investment officer of Allan Gray, a top 10 SAB investor. "This is the deal of deals and it is one of the reasons why ABI can justify paying a high premium."

No offer has been made, but analysts estimate a price of 40 to 45 pounds per SAB share, which would be a 35 to 52 percent premium to the stock at the start of the week.

Liddle welcomes the opportunity to assess any offer, and said that for any consideration paid in ABI shares, he would like to see a listing in Johannesburg, where SABMiller started out in 1895 selling beer to gold miners.

But given the footprints of both companies, divestitures are likely, presenting opportunities for the likes of Heineken (HEIN.AS: Quote), Carlsberg (CARLb.CO: Quote) and Molson Coors (TAP.N: Quote).

The company would almost certainly have to sell SABMiller's majority stake in U.S. joint venture MillerCoors. Partner Molson Coors is the obvious buyer, so would likely get an attractive price. With a price tag of around $10 billion, it would be a big deal for Molson, whose market value is $15 billion after its shares surged following news of the approach. Having it in flux could be an opportunity for others.   Continued...

A barman pours a beer produced by brewing company SAB Miller at a bar in Cape Town, September 16, 2015. REUTERS/Mike Hutchings