Global brewing giant SABMiller on Tuesday announced a major investment in Latin America through a transaction with the Santo Domingo Group (SDG) in which SABMiller will obtain a controlling interest in Bavaria South America.
The transaction will be effected by way of a merger, and will result in the SDG owning an economic interest of approximately 15,1% in SABMiller.
Shares in SABMiller climbed 3,3% or R3,46 early on Tuesday as the market greeted the news favourably.
By 9.30am, SABMiller shares were trading on the JSE Securities Exchange at R107,30, up from R103,94 at Monday’s close, with about 958 000 shares having changed hands.
One beverage industry analyst, who asked not to be named, said the rally was sparked by the news that SABMiller had beat Heineken in the race for Bavaria, as well as relief that the company had not “overpaid” for the Colombian brewer, whose operations are valued at between $6-billion and $8-billion. The market had also feared SABMiller might have to issue debt or large numbers of new shares.
The transaction, which has been several months in the making after stiff competition between SABMiller and Heineken for Bavaria, will see SABMiller issue 225-million new shares to the value of $3,5-billion to the SDG, resulting in the SDG owning an economic interest of approximately 15,1% in SABMiller and SABMiller obtaining an indirect 71,8% interest in Bavaria.
The SDG’s shareholding is subject to a five-year lock-up, with certain exceptions.
Following this, SABMiller will make a cash offer to acquire the Bavaria shares held by minority public shareholders in Colombia, at a price of $19,48 per Bavaria share — the value per share used as a reference for the transaction. SABMiller will also make an offer to acquire the listed voting “A” shares in Bavaria’s subsidiary in Peru, as well as agreeing to acquire for cash certain minority interests in other subsidiaries.
The total cash requirement for these minority transactions is estimated at $2,1-billion.
SABMiller said in a statement that the implied equity value of Bavaria is $4,8-billion and, including net debt and minority interests, the total implied enterprise value for 100% of the Bavaria group is approximately $7,8-billion.
Bavaria is the second-largest brewer in South America, with leading market positions in Colombia (99% of the beer market), Peru (99%), Ecuador (93%) and Panama (79%), where its key brands are Ãguila, Cristal, Pilsener and Atlas, respectively.
The combined business will have annual beer volumes of approximately 175-million hectolitres, pro forma aggregated net revenues of approximately $12,5-billion and pro forma aggregated earnings before interest, tax, depreciation and amortisation of approximately $3,5-billion, SABMiller said.
Bavaria is highly complementary to SABMiller’s existing operations and provides access to a major additional source of profitable growth in one of the global beer industry’s most strategically important and fastest-growing regions.
The Andean region of South America is forecast to achieve a compound annual growth rate in beer volumes of 4% over the next five years, well in excess of the global industry average of approximately 2%.
Following the transaction, SABMiller will have a leading position in South America, in addition to its existing strong positions in the United States, Europe, Africa and Asia, establishing SABMiller as a leading brewer across five continents.
Bavaria will further diversify SABMiller’s existing portfolio of businesses and brands in highly attractive growth markets, SABMiller said. — I-Net Bridge