05 Mar 2014 AB InBev’s need for SABMiller mega-deal grows
After AB InBev boosted revenue more than fivefold in the last ten years with the help of $91-billion of acquisitions, growth for the maker of Budweiser and Stella Artois is forecast to slow over the next decade, according to analysts’ estimates compiled by Bloomberg.
Tapping into SABMiller’s presence in faster-expanding regions such as Africa would allow AB InBev to get that growth flowing again, shareholders Alpine Woods Capital Investors and Henderson Global Investors said.
SABMiller CEO Alan Clark told Bloomberg News in January that the case could be made for a tie-up, even though it would likely require divesting some US operations to appease regulators.
Sanford C.Bernstein & Co, which dubbed an AB InBev-SABMiller combination “MegaBrew”, estimates it would have almost half the global beer profit pool. The deal would increase earnings at AB InBev immediately if it paid a 30 percent premium for SABMiller in cash, data compiled by Bloomberg show. Cost cuts could drive profit even higher.
“It’s such an obvious next — and indeed last — big move by the very acquisitive AB InBev,” said Matthew Beesley, head of global equities at London-based Henderson Global Investors, which oversees $125-billion, including shares of AB InBev.
“There’s also clearly some strategic rationale to the deal, neatly filling all the geographic holes AB InBev talks of wanting to fill.”
An acquisition of SABMiller would give AB InBev more than $7 billion of revenue in Africa with brands including Castle and almost $4 billion of sales in Asia, reducing AB InBev’s dependence on the Americas and Brazil, data compiled by Bloomberg show. With Latin America representing SABMiller’s biggest market, a deal would also broaden AB InBev’s presence in countries such as Colombia, Ecuador and Peru. Its Latin American brands include Cristal and Aguila.
“SAB has a lot of emerging-market assets, and in particular, in areas where AB InBev doesn’t necessarily have too much influence,” Bryan Keane, a money manager at Alpine Woods, said in a phone interview. “Right now, AB InBev does not have a lot of business in Africa and SAB is a large player there. That’s one of the areas where beer consumption is growing, and it would allow AB InBev to further diversify the business.”