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After weeks of buzz, InBev SA said June 11 it had put forth an offer
for Anheuser-Busch Cos. of $65 per share, or nearly $46.3 billion.
But according to press reports, Mexico's Grupo Modelo may crash the party.
Having failed to pounce on dealmaking opportunities as the industry consolidated around it, the brewer behind Budweiser and Bud Light may have no choice but to succumb to the unsolicited approach, The Deal's Renee Cordes noted. But Anheuser-Busch is said to be in talks with the Mexican brewer, a deal that would likely leave InBev out to dry. "It is estimated that the enlarged entity could preside over a quarter of the world's beer market," Cordes wrote in May. InBev surpasses Anheuser-Busch as the largest brewer by sales, and the latter has long been talked about as a possible target as consolidation at the top of the beer industry abounds. According to the FT, Cordes pointed out, InBev's Plan B would be a deal with SABMiller plc if things don't pan out with Anheuser-Busch. Meanwhile, deals in two hot areas for brewers -- emerging markets and craft beer -- kicked off May. SABMiller swooped on its latest target May 8 with a $130 million deal for CJSC Sarmat,
which marks its foray into the Ukrainian market. It was SABMiller's first
public acquisition since rumors swirled that the brewer was trying to crash the £7.8 billion ($15.9 billion) Scottish & Newcastle
plc-Carlsberg A/S-Heineken NV party. (SABMiller again went after emerging markets in June with a deal, terms of which were not disclosed, for Russia's LLC Vladpivo.) The Sarmat news came a week after Burlington, Vt.-based Magic Hat Brewing Co. & Performance Arts Center Inc. unveiled a tentative, $35 million deal for Seattle's Pyramid Breweries Inc. that will link two U.S. craft brewers. Craft brewers are distinct in that they don't just distribute the product, but make it as well. More consolidation is expected among craft brewers, which is growing faster than the rest of the sector, Magic Hat's attorney told The Deal. (Fellow craft brewers Redhook Ale Brewery Inc. and Widmer Brothers Brewing Co. in November unveiled plans for a $50 million merger.) But back to SAB Miller and the last megamerger among brewers. In February, speculation abounded over whether SABMiller planned
to crash the S&N-Carlsberg-Heineken party. It didn't, it turned out, according to a statement from SABMiller Feb. 20. The brewer said it "undertook a preliminary evaluation" of S&N, but decided against a bid. SABMiller put out the release in response to media speculation it was preparing to launch a counteroffer to the agreed-upon 800 pence per share S&N-Carlsberg-Heineken deal. The Financial Times reported on its Web site Feb. 20 SABMiller was planning a counterbid worth 850 pence per share for S&N. Analysts expressed skepticism over the suggestion, according to a Reuters report Feb. 20, as an SABMiller-S&N transaction could raise competition concerns and SABMiller wouldn't gain full control of Russia's Baltic Beverages Holding AB, the 50-50 joint venture owned by S&N and Carlsberg. The buzz did, however, drive S&N shares up to 811.5 pence, before closing up 2.475% at 807.5 pence. Feb. 21, S&N shares were down 2.6% by early afternoon in London to 786.5 pence. For a while, Edinburgh, Scotland-based S&N, which makes Kronenbourg 1664 and Newcastle Brown Ale, stood firm against Carlsberg and Heineken's hostile takeover moves. S&N began to crack Jan. 17, agreeing to talk with its suitors. The buyers then on Jan. 24 won an extra day to close the deal, having by noon Jan. 25 to declare their intentions before the U.K. Takeover Panel or jump ship. Over the months, S&N tried several measures to bolster its takeover defense. The brewer on Jan. 10 rejected a sweetened offer from the would-be buyers that at the time valued the target at £10 billion. S&N then said it had shored up financing to buy Carlsberg out of the pair's Baltic Beverages JV. On Jan. 3, the company said it would consider some divestitures to fend off its pursuers, beyond a series of previously revealed sales to that end. Carlsberg and Heineken on Nov. 15 raised their unsolicited offer for S&N to £7.3 billion, only to be rebuffed in turn. The news came nearly three weeks after S&N rejected their earlier, £6.8 billion advance. Days after Carlsberg and Heineken said they were mulling a bid and subsequent breakup for S&N, the target shot back against Carlsberg, alleging a breach of contract over their Baltic Beverages joint venture. (The deal structure called for Carlsberg to control Baltic Beverages and the target's business in France and Greece, while Heineken will pick up S&N's operations in the rest of Europe, including the U.K.) Meanwhile, the dealmaking among brewers chugged along through 2007. SABMiller said Nov. 19 it would pay $1.2 billion for Dutch brewer Royal Grolsch NV, with plans to export it to emerging markets, where the premium beer market is developing, just days after Carlsberg and Heineken raised their S&N offer to $15 billion. That sweetened bid followed news that Redhook and Widmer planned to merge in an all-stock deal worth a reported $50 million and form a company called Craft Brewers Alliance. The Pacific Northwest-based brewers first said in January they were considering a merger. The Carlsberg-Heineken-S&N saga began a little more than a week after the No. 2 and No. 3 brewers in the U.S., Molson Coors Brewing Co. and SABMiller, made waves Oct. 9 when they unveiled plans to merge their U.S. and Puerto Rican operations to create a brewing heavyweight with $6.6 billion in annual revenue, taking Anheuser-Busch, the largest U.S. brewer, Molson Coors vice chairman Pete Coors pointed to "profound changes" in the industry in the U.S. posing new challenges for both companies. The Molson-Miller news, in turn, generated speculation about a possible team up between Anheuser-Busch and Belgium's InBev. The U.S. Department of Justice cleared the Miller-Coors venture June 5, 2008. GLOBAL AMBITIONS Meanwhile, brewers elsewhere around the globe were seeing swells of profits and thirsting for returns elsewhere, depending upon where their market reach extended. SABMiller's Chinese joint venture said Aug. 24 it spent $79 million on four breweries in northeast China further expanding across the country. China Resources Snow Breweries Ltd., a JV between London- and Johannesburg-based SABMiller, which counts among its brands Miller and Pilsner Urquell, and China Resources Enterprise Ltd. that dates to 1994, expanded in the region in January with a $320 million cash to acquire remaining minority shares in 13 breweries in southwestern China's Sichuan province, where, the brewer said, beer consumption exceeds the nation's per capita yearly average, 23 liters, (or about 50 16 oz. beers), a figure, more recent reports suggest, is on the rise. The JV operates more than 50 breweries across mainland China and the country's favorite beer, Snow. Days later, Anheuser-Busch's Tsingtao Brewery Co. Ltd., the No. 2 brewer in the region, reported Aug. 27 an almost 64% jump in profit for the first half of 2007, to $348.4 million from $212.7 a year ago. A seemingly good place to be for brewers, U.S. craft beer entered the Chinese market in July. Meanwhile Kirin Holdings Co. and Sapporo Holdings Ltd. both cut their full-year forecasts in early August, Reuters reported, pointing to lower demand in Japan. Earlier this year, Sapporo's largest shareholder, Steel Partners LP with 17.52%, sought management approval in February to boost its stake in the beermaker to 66.6% through its Steel Partners Japan Strategic Fund (Offshore) LP. Had it not failed, the deal would have effectively ceded control to the New York hedge fund. And having successfully tapped into emerging markets like Russia and Asia, Dutch brewer Heineken reported Aug. 29 a rise in operating profit of nearly 35% for the first half of 2007, according to Reuters. A LOYAL AUDIENCE Back in the U.S., Coors Brewing Co. was a brewer among many priming for the kick-off of regular season football Thursday night, Sept. 6. The Golden, Colo.-based company said Aug. 27 it had teamed with the NFL, offering customers incentives like regular season tickets and other prizes. The company, which calls Coors Light "The World's Most Refreshing Beer," also announced new partnerships with the New York Giants and the Tennessee Titans and extending deals with the New York Jets and Pittsburgh Steelers. Ever-evolving with the seasons, Miller Brewing Co. detailed Aug. 22 its 2007 U.S. football promotion, teaming with ESPN nationally and a handful of teams locally, including five-year relationships with the Atlanta Falcons, Baltimore Ravens and Minnesota Vikings. Miller Lite will be the featured beer of choice. The brewer's campaign: "Beer That's Made to Be Great Makes Gameday Better," got underway in August. Both brewers boast relationships with other NFL teams, as well. Earlier in the summer, Miller threw a little taste of Mexico into its lineup. The beermaker unveiled plans for a nationwide launch of Miller Chill, a bottled play on the chelada, a concoction consisting of beer and lime juice served over ice in a glass rimmed with salt. Chill pervaded the U.S. in the warmer months, after a March test launch in Arizona, Florida, New Mexico, San Diego and Texas. According to a Wall Street Journal report, the brewer planned to spend more than $30 million advertising the brew to give a shot in the arm to its U.S. sales as it faces stiff competition from microbrews and imports. Indeed, it can be rough going out there. Pittsburgh Brewing Co. exited Chapter 11 under new ownership as Iron City Brewing Co. after filing for protection, for the second time, in December 2005 over a stink with the Pittsburgh Water and Sewer Authority. (Fellow brewer Coast Range Brewing Co. also found itself in bankruptcy protection in California on Dec. 12, 2007.)
Capping off 2006, private equity firms Pacific Equity Partners and CCMP Capital Asia Ltd. landed New Zealand alcoholic beverage group Independent Liquor Ltd. with $896 million after an exodus by strategic bidders including Lion Nathan Ltd., Foster's Group Ltd., Singapore-based Asia Pacific Breweries Ltd. and Nikko Principal Investments Ltd. Foster's may be "Australian for beer," but in 2006, it smelled like a takeover target. The largest beer and wine producer Down Under saw its shares jump 9.7% Tuesday, Aug. 29, 2006, amid speculation in the Sydney Morning Herald that rivals SABMiller and InBev could make a go for the brewer. Yielding its richest return in 2006, Foster's Group Ltd. sold off its brand rights in 50+ countries to S&N for $539 million in April. In June, the company announced an auction for four assets: its Rosemount Denman and Penfolds Nuriootpa wineries in Australia; its Domaine La Motte estate in France; and fortified-wine production facility Seppeltsfield. The news came just weeks after the company moved out of China with the sale of its Shanghai operations to Japan's Suntory Group for an undisclosed price. Foster's announced a restructuring program in mid-July to operate as three regional companies focused on Australia, Asia and the Pacific; on the Americas; and on Europe, the Middle East and Africa. The company has also put its wine group on the block after booking an $86 million impairment charge on the division. In early August, the company retreated from brewing in Asia, selling off $225 million worth of assets in India and Vietnam.
LAST HURRAH Before it began trimming its diet, Foster's won over Southcorp Ltd. with a sweetened, $2.5 billion bid in April 2005. Months later, Foster's was also thought to be a prospective bidder for Vincor International Inc. It wasn't in the stars, though, and after months of sparring, Vincor eventually went to Constellation Brands Inc. for $1.3 billion in April, a deal that Constellation chairman and chief executive Richard Sands called "meant to be." A THIRST TO QUENCH In 2006, Foster's wasn't the only beverage group to draw interest from thirsty acquirers.
--Carolyn Murphy
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