Bryggeri

InBev Bid for Anheuser-Busch May Trigger Beer Mergers (Update2)

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, said analysts including Dresdner Kleinwort's Andrew Holland. SABMiller has told InBev it would consider a bid from the Belgian company, Financial Times reported today on its Alphaville blog.

InBev, the maker of Stella Artois and Beck's, is studying a bid for Anheuser-Busch, according to two people with knowledge of InBev's plans. An acquisition would give InBev one-fourth of global beer sales and more than half the U.S. market. InBev, the world's largest brewer by sales, has units in Brazil, Europe and China. 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.''

Anadolu Efes Biracilik & Malt Sanayii AS, the largest brewer in Turkey, and Fomento Economico, Latin America's largest beverage company and the brewer of Dos Equis beer, may be targets for Heineken, said Holland. SABMiller, formed through the 2002 combination of South African Breweries Plc and Miller Brewing Co., declined to comment on the Alphaville report.

Takeover Plans

InBev, based in Leuven, Belgium, has considered buying Anheuser-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 St. Louis-based 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.

Anheuser-Busch fell $1.62 to $55.13 at 4:15 p.m. in New York Stock Exchange composite trading. The shares gained 8.2 percent between May 23, when Alphaville said InBev was preparing a $46 billion bid for the brewer, and yesterday.

InBev gained 1.26 euros to 48.26 euros in Brussels trading. The stock was the second-worst performer in the seven-company Bloomberg Europe Beverages Index this year through yesterday, dropping 18 percent.

Miller, Coors

London-based SABMiller might be forced to expand on its agreement to combine its U.S. unit with that of Molson Coors, said Holland.

``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.

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.

Encroaching on Mexico

Fomento Economico, known as Femsa, may be ``the best way of participating in the global consolidation theme as consolidation encroaches on Mexico,'' said Carlos Laboy, an analyst at Credit Suisse in New York. The company may fetch $82 in a buyout, he said in a note to clients yesterday.

The Monterrey, Mexico-based brewer rose 42 cents to $46.38 at 4:01 p.m. in New York Stock Exchange composite trading. The shares are up 22 percent this year.

Femsa's price-to-earnings ratio of 19 is higher than SABMiller's at 16.6, according to data compiled by Bloomberg. Heineken trades at 14.5 times projected earnings for the next year.

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.

``Anheuser-Busch could just about afford to acquire this,'' Earlam said. ``It is certainly not a given.''

Heineken, Carlsberg

Some brewers, including Heineken and Carlsberg A/S, may not be candidates for takeovers because they 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.

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.