InBev Offer for Anheuser-Busch Might Trigger More Beer Mergers
By Duane D. Stanford and Kevin Bell
May 28 (Bloomberg) -- An InBev NV purchase of U.S. brewer Anheuser-Busch Cos. may trigger more mergers among beer producers seeking to match the combined company's ability to boost earnings through wider distribution.
SABMiller Plc and Molson Coors Brewing Co. might try merging, while Mexico-based Fomento Economico Mexicano SAB or Turkey's largest brewer may be takeover targets, analysts and investors said. InBev, the maker of Stella Artois and Beck's, is considering a bid for Anheuser-Busch, according to two people with knowledge of InBev's plans.
An Anheuser-Busch acquisition would give InBev one-fourth of global beer sales and more than half of the U.S. market. InBev, the world's largest brewer by sales, runs divisions in Brazil, Europe and China. St. Louis-based Anheuser-Busch is the biggest beer company in the U.S.
``The top five brewers already control two-thirds of the world beer market,'' Marcel Hooijmaijers, an analyst at Landsbanki Kepler in Amsterdam, said in an interview. ``That could go up to 85 percent.''
InBev, based in Leuven, Belgium, has considered buying mAnheuser-Busch or SABMiller Plc since Heineken NV and Carlsberg A/S acquired Scottish & Newcastle Plc for 7.8 billion pounds ($15.4 billion) this year, one of the people said, adding that Anheuser-Busch is the favored target.
An InBev bid for either company isn't imminent, according to the people, who declined to be identified as details are private. InBev spokeswoman Marianne Amssoms wasn't immediately available to comment. Anheuser-Busch Chief Financial Officer Randolph Baker said in a statement last week that the company doesn't comment on rumors.
Share Gains
Anheuser-Busch rose 14 cents to $56.75 in New York Stock Exchange composite trading yesterday. The shares gained 8.2 percent since May 23 when the Financial Times' Alphaville blog said that InBev was preparing a $46 billion bid for the brewer.
SABMiller jumped the most since July 2005 in London trading yesterday, buoyed by an FT report saying the brewer has held talks with InBev.
InBev fell to the lowest in a year and a half yesterday in Brussels trading. The stock has been the third-worst performer in the seven-company Bloomberg Europe Beverages Index this year, dropping 16 percent.
London-based SABMiller might be forced to expand on its agreement to combine its U.S. unit with that of Molson Coors, said Andrew Holland, an analyst with Dresdner Kleinwort.
``My guess is that could lead to an eventual merger of the parent companies as well,'' Holland said. Molson Coors spokesman Paul de la Plante said the company doesn't comment on market rumors. SABMiller spokesman Nigel Fairbrass declined to comment on the company's possible transactions.
Flexibility
SABMiller, the second-biggest U.S. brewer, and Molson Coors, based in both Denver and Montreal, will merge their U.S. units in a deal the companies expect to close within weeks. The beermakers announced the MillerCoors joint venture in October after SABMiller lost market share to Anheuser-Busch.
Among the top five brewers, InBev, Anheuser-Busch and SABMiller have the most ``financial flexibility'' to pursue purchases because of their cash flow and ability to borrow, Fitch Ratings Ltd. said in a May 22 report.
InBev retained JPMorgan Chase & Co. and Lazard Ltd. as advisers, and Banco Santander SA and JPMorgan will help fund a bid should one be made, the people said. Anheuser-Busch was valued at $41 billion by the stock market yesterday.
Analysts including Melissa Earlam of UBS Warburg Ltd. in London said Anheuser may try to make itself too expensive for InBev by purchasing full control of Grupo Modelo SAB, the maker of Corona beer. Anheuser controls about 50 percent of Mexico's largest brewer through direct and indirect stock holdings.
Takeover Targets
``Anheuser-Busch could just about afford to acquire this,'' Earlam said. ``It is certainly not a given.''
Among the world's top 10 brewers, only Anheuser and SAB are considered takeover targets, because others have shareholder structures that discourage purchases or already have alliances with beermakers, said Hooijmaijers of Landsbanki Kepler. Japan's Asahi Breweries Ltd. and Kirin Holdings Co. aren't very attractive because of declines in that market, he said.
Holland, the analyst at Dresdner, said Heineken's next target might be Anadolu Efes Biracilik & Malt Sanayii AS, the largest brewer in Turkey. Heineken may also be interested in Fomento Economico, Latin America's largest beverage company and the brewer of Dos Equis beer.
``I don't think those are going to happen imminently, but I think those are still in the cards,'' said Holland, who recommends investors hold InBev and Carlsberg shares.
Global brewers may prefer to seek regional expansion before going after any ``industry-transforming merger of peers,'' Fitch said in its report. In Western Europe, 8 to 10 companies remain independent and may come up for sale after facing pressure to increase profit amid slowing sales and higher costs, it said.
The brewing industry is at an ``intermediate stage of industry consolidation,'' with more to come, Fitch said.
To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net; Kevin Bell in Toronto at kbell2@bloomberg.net.