BELGIUM & LONDON -- In a global brewing industry marked by huge consolidation over the last decade, bankers are hopeful of a more-than $80 billion "deal to end all deals" between the industry's two giants, Anheuser-Busch InBev and SABMiller, according to a Reuters report.
If AB InBev buys SABMiller it could be the biggest cash takeover in history and would create a group brewing a third of the world's beer, said the report. Analysts and bankers suggest 2013 as a likely time frame for a takeover that is seen as the final play in deal making in big world brewing.
They say the world's top brewer, A-B InBev, will not be deterred from making a move for SABMiller even after the No. 2 brewer swallows up Australia's Foster's by the end of 2011 in a $10.2 billion deal. A Foster's deal may delay an A-B InBev-SABMiller linkup by six to 12 months, pushing a possible deal to 2013, after A-B InBev's CEO Carlos Brito said its debt would fall during 2012 to levels that made further acquisitions possible.
A deal would close out a decade of rapid consolidation led largely by A-B InBev and SABMiller and leave few remaining easy targets, with the remaining big global brewers like Heineken and Carlsberg, as well as A-B InBev, controlled by families, individuals or charity shareholders.
"The Foster's deal may delay an A-B InBev-SABMiller tie up, but it doesn't change the strategic view that eventually it will make sense for these two to link up," one banker who has worked for one of the big brewers told the news agency.
A deal would link Belgium-based A-B InBev's Budweiser, Stella Artois and Brahma beer brands with London-based SABMiller's Peroni, Miller Lite and Grolsch, and cause only major anti-trust headaches in the United States and China, which would force selloffs in those markets.
A-B InBev acquired Budweiser-brewer Anheuser-Busch for $52 billion in 2008 in the world's biggest cash takeover, and due to big cost savings, selloffs and hefty cash generation has cut its debt to be able to start thinking about its next move.
SABMiller is attractive to A-B InBev due to the SABMiller's large operations in the high-growth emerging markets of Africa, South America and eastern Europe, which will help A-B InBev reduce its reliance on the tough U.S. beer market
"Over 90% of A-B InBev's earnings come from America, so a move for SABMiller would create a real powerhouse with big operations on six continents," said another banker. "A-B InBev has been built by a string of good M&A deals over the last decade, so the market is likely to support one final deal based on its impressive record especially with the Anheuser-Busch deal."
A potential tie up would entail at least $13 billion of disposals to get around anti-trust issues, but annual cost savings could potentially top $1 billion. Disposals would likely include the sale of SABMiller's 58% stake in U.S. brewer MillerCoors, probably to 42% co-owner Molson Coors, for around $9 billion as MillerCoor's near-30% U.S. market share added to A-B InBev's 50% would be too much for U.S. authorities.
A further move would likely be the sale of SABMiller's 49% share in leading Chinese brewer CR Snow, to appease Chinese authorities as A-B InBev already has a significant Chinese presence.
SABMiller is more vulnerable than other big brewers such as Heineken and Carlsberg as it has a relatively open shareholder base, said the report, while other possible targets in the beer world such a MolsonCoors or Africa's Castel are family controlled.
SABMiller's two big shareholders include U.S. cigarette maker Altria,which has a 27.1% stake as a legacy of SABMiller's 2002 deal to buy Miller, and the Colombian Santo Domingo family with a 14.2% stake that dates back to SABMiller's deal to acquire South American brewer Bavaria in 2005.
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