InBev holds key to shake-up in global beer market
Belgiums InBev NV grew rapidly with the acquisition of Brazils AmBev in 2004 and is expected by analysts to be at the centre of any potential mega-deal planned after S%26amp;N agreed to be broken up by Carlsberg and Heineken last week.
The worlds top three brewers InBev, SABMiller and Anheuser-Busch are all suffering from the soaring price of barley and aluminium cans and so would look at deals that could trim their own costs and boost sales of their high-margin beers like Stella Artois, Peroni and Budweiser, analysts said.
But with most of worlds top ten brewers controlled by families or blocks of shareholders, deals are difficult to predict and the only certainty was the demise of S%26amp;N as it had the only true open share register among the top ten brewers.
Analysts say St Louis-based Anheuser will come under pressure as its two biggest US domestic competitors SABMiller and MolsonCoors move closer to forming a US joint venture %26ndash; so the Budweiser-brewer may turn to InBev.
They say an InBev-SABMiller deal, linking the worlds two top brewers, is more of a wildcard move but cannot be ruled out as both are consummate deal-makers and they have grown rapidly over the last decade, and a deal like this would mirror an earlier mooted Interbrew-SAB linkup in 2001.
Both deals would entail little overlap and hence few anti-trust obstacles to block their path, but with minimal overlaps there could be limited cost savings %26ndash; diluting the financial case behind a linkup.
A link between InBev and Anheuser is a realistic option as the US brewer faces increased pressure from SABMiller and MolsonCoors in its own back yard, said one industry analyst.
A two-year lull in big brewing deals came to an end last October, when first SABMiller announced a planned joint venture with MolsonCoors in the United States, then Carlsberg and Heineken approached S%26amp;N with a joint bid.
While not a transformational deal, a SABMiller-MolsonCoors linkup in the United States, yet to be cleared by regulators, would put pressure on Anheuser to act decisively and some view a similar but global joint venture with InBev as the most attractive and realistic option.
The SABMiller-MolsonCoors deal %26ndash; linking the US No 2 and No 3 brewers %26ndash; would create an operator with a US market share of nearly 30 per cent, against Anheuser at just under half, and could lead to an eventual full takeover of MolsonCoors.
When the worlds fourth and fifth brewers Heineken and Carlsberg finally won the 7.8 billion pound ($NZ20 billion) battle to take over and split up No 6 S%26amp;N, some thought it may prompt further takeover moves after the two-year pause since SABMiller bought Latin American brewer Bavaria in October 2005.
Analysts says Anheuser with its key markets of the United States, Mexico and China needs a broader earnings base, but some ask why InBev would want Anheusers mature US market exposure diluting InBevs two-third of earnings from emerging markets.
Reports emerged in a Brazilian newspaper last February of an InBev-Anheuser link which would give the enlarged group greater global scale, while a combination of Anheusers US business and InBevs Labatt in Canada would give better regional scale and their Chinese interests would be complementary.
Some point out that although the Busch family only controls around 4 per cent of the shares, the family still holds tremendous influence and InBev would probably have to reach an agreed deal in an industry which traditionally has shied away from hostile bids.
Others note Anheuser already distributes InBevs European brands in the United States and Labatt has a licence to brew Bud Light in Canada, so there is little to gain from a full merger.
A possible InBev-SABMiller deal is more intriguing, based on combining better regional scale and reduced regional competition, while only a few markets such as the Czech Republic and Hungary would present any regulatory hurdles.
A deal would give the combined company virtual control of South America, plus increased share in Russia and China, while InBevs western Europe businesses and SABMillers central European operations would give increased scale.
But again it might be complex given the two groups shareholders. InBev is controlled by the Belgian and Brazilian families which came together in 2004 to form the group and its free float is under 35 per cent.
SABMiller is still owned 28.6 per cent by Altria and 15 per cent by the San Domingo family as legacies of its deals to buy Miller in 2002 and Bavaria in 2005.
Those behind S%26amp;N in world rankings all have big shareholders including MolsonCoors, Mexicos Modelo, Chinas Tsingtao and Mexicos FEMSA, making future deals difficult if not impossible, analysts said.
