MegaBrew may have to wait a bit. The possible combination of Anheuser-Busch InBev NV and its $86 billion rival SABMiller Plc has been the subject of deal chatter for at least a year.
The Brazilian investors behind 3G Capital are some of the top holders of AB InBev. Some analysts have speculated that 3G could help orchestrate a transaction just as it did when InBev NV bought Budweiser maker Anheuser- Busch in 2008 to create the No. 1 brewer.
The problem is, that’s the same 3G Capital that just helped facilitate the merger agreement announced Wednesday between food giants Kraft Foods Group Inc. and H.J. Heinz. 3G may only have room for one mega-deal at a time.
“One of the possibilities would have been that 3G and AB InBev would have gone for SABMiller in sort of a combined way,” Richard Withagen, an Amsterdam-based analyst at Kepler Cheuvreux, said in a phone interview. “They could do it on their own. But obviously the involvement of 3G would be of help.”
Combining SABMiller with AB InBev would probably yield about $1 billion in annual savings, less than the $1.5 billion that Kraft and Heinz are aiming for, said Morningstar Inc.’s Philip Gorham. That may give some explanation for why the latter was more attractive to 3G at this point.
Going after Kraft could also be a sign that 3G is focusing on expansion outside of beer and will use AB InBev as a cash machine to fuel that, said Ian Shackleton of Nomura Holdings Inc.
Other Scenarios
AB InBev could start looking at other deal scenarios. Diageo Plc’s Guinness brand, energy-drink maker Monster Beverage Corp., Keurig Green Mountain Inc., or even $142 billion snack- and-soda seller PepsiCo Inc., are targets that it could study.
MegaBrew is still very much a possibility, even if it’s likely pushed back at this point. Like the big packaged-food companies, AB InBev is facing slower growth and needs acquisitions to keep the revenue gains going. Buying SABMiller would help the $196 billion brewer expand in regions such as Africa. The challenges to a deal are valuation and antitrust scrutiny.
AB InBev “can still do things on its own, bolt-on acquisitions in Asia would be a good place to pad out its market share for example, but I think SAB is the transformative deal,” Morningstar’s Gorham said in a phone interview. “It’s about timing. The stars have to line up. You have to have 3G with the strategic and financial flexibility to do a big deal.”
News by Bloomberg, edited by ESM
