Tho 155 beer deals done since late 04, only 1 over $1 bil, SABMiller’s Bavaria buy in 05. “We anticipate step-up,” Dresdner Kleinwort analysts recently wrote, adding: “We expect the endgame scenario to emerge by way of mega-deals,” and to play out by end of decade. Why? Several new “M&A catalysts” identified by DK. One is lower debt levels, especially at InBev and Heineken, which gives “increased scope for acquisitions.” At same time, #5 global player “Carlsberg has completely transformed its prospects” by changing rules of foundation that owns biz, allowing it to double equity base and do a big deal. Indeed, Carlsberg’s chairman recently said: “A major deal is likely. Carlsberg has the strength to become bigger.” Similarly, #4 Heineken has also altered its ownership structure in way that will make it easier to raise debt for acquisition, and “scotched any speculation that it may be a seller…rather than a buyer.” Another factor: US domestic beer has gone “ex-growth,” i.e., flattish volume and “limited pricing.” Those factors suggest AB, SABMiller and Molson Coors “will be forced to do deals to improve their growth rate.”
Most likely combos in DK’s view: Carlsberg purchase of Scottish & Newcastle to get 100% of fast-growing Russian brewer BBH (each owns half now), and dilute dependence on sluggish Western European mkt. Merrill Lynch recently called that deal “inevitable.” Next up: InBev/AB, since InBev “views AB as natural partner,” AB needs to build biz beyond US and combo gives InBev its next big oppty to cut costs. Third most-likely deal: SABMiller/ Molson Coors in US would “transform profitability.” DK suspects Molson Coors families not likely to sell out, so a US joint-venture more likely. Heineken has two “preferred” targets, DK thinks: Turkish brewer Efes and Mexican brewer FEMSA. Heineken recently extended partnership with FEMSA in US and South America. Problem is both targets “family-owned and well managed.” Either AB/InBev or Miller/Coors could have big implications for US, from potential of cost-cutting at AB to much-stronger #2 competitor. Then again, in fast-changing bev world, with evolution/revolution within each tier and more multiple bev strategies playin’ out, M&A among global brewers just one of many factors transforming the biz.
Reduced Debt Levels, New Ownership Structures, Slow US Mkt will Drive Global M&A, Sez DK
Publishing Info
- Newsletter: Beer Marketer's INSIGHTS
- Published: 07/01/2007
- Volume: 38
- Issue #: 12