Shares fizz on beer merger
THE brewing giant behind Budweiser has made a longawaited approach for Peroni-making rival SABMiller to form a £ 177bn beer behemoth.
Belgium-based AB InBev, which is already the world’s largest brewer, said it wanted to agree a takeover with the number two player, which has a £60bn market value.
If approved the deal would be the sixth largest in corporate history and create a brewer responsible for a third of all the beer made globally.
Shares in SAB, which has a big footprint in Africa, rose 20pc, while US- quoted AB InBev, which is strong in Latin America, increased nearly 7pc.
Consolidation has been rife among the brewers and a tie-up between the two largest players has been long expected.
SAB, which has a dual listing on stock markets in London and Johannesburg, said ‘Anheuser- Busch InBev has informed SABMiller that it intends to make a proposal to acquire SABMiller’.
It added: ‘ No proposal has yet been received and the board has no further details about the terms of any such proposal.’
AB InBev said it ‘ notes the announcement made by SABMiller’, adding: ‘AB InBev confirms that it has made an approach regarding a combination of the two companies.
‘AB InBev’s intention is to work with SABMiller’s board toward a recommended transaction.’
It also said there can be no certainty an agreement will be reached.
Any bid would trigger the attention of competition authorities especially in America where both have a strong presence.
It is likely both firms would have to make a string of disposals to get any deal waved through by regulators.
There have been reports SAB would have to ditch its Molson Coors joint venture in America.
Many in the City believe AB InBev will succeed in absorbing its smaller rival because of its track record in staging mega deals.
It is run by chief executive Carlos Brito and controlled by private equity firm 3G Capital, which is behind Burger King and Kraft Foods. The 3G firm was formed in 2004 by Brazilian billionaires Carlos Alberto Sicupira, Jorge Paulo Lemann and Marcel Telles.
AB InBev was formed by a series of mergers starting in 2004 when Brazil’s biggest brewer Ambev acquired Belgium’s Interbrew.
The newly-combined firm went on, against the odds, to buy Budweiser owner Anheuser-Busch in 2008 in a £33bn deal.
Analysts believe there is a strong strategic logic for the world’s two biggest brewers to come together.
Andrea Pistacchi, analyst at Citi, said: ‘At this point, we believe it is likely this deal will go ahead. We believe ABI needs to do a deal, acquiring SAB makes a lot of sense strategically.
‘From SAB’s point of view, we don’t see how it can credibly fend off ABI’s approach in a way that adds as much value to shareholders.’
He said ABI needs to do a deal because it is struggling to grow through making more beer itself.
Profits are expected to be flat in America for the next few years and the Latin American market is getting tougher, partly due to slowing economies and tax increases.
The acquisition of SAB would also catapult it into Africa where AB InBev has almost no exposure.
Africa is probably the most attractive region for long- term profit growth for global brewers with a large population and strong domestic product growth.
It comprises 12 of the world’s 25 fastest growing economies and has 25 cities with a population greater than 1m.
SAB controls around 38pc of regional beer, with 25pc from privately owned Castel (in which SAB has a 20pc stake) followed by Heineken at 18pc and Guinness owner Diageo.