Marriage for ‘beauty not money’

SABMiller has won its fight to buy Bavaria, a Colombian-based brewer regarded as the last major prize in the global beer industry’s pursuit of growth in South America.

SAB’s shares moved sharply higher as investors applauded an apparent bargain price of $7,8-billion, almost $1-billion below some market estimates of Bavaria’s value.

Heineken was the other remaining bidder for a business that dominates the beer markets in Peru, Ecuador and Panama. Such countries are prime targets for most of the world’s big brewers as they try to combat intense price competition in Western markets and a switch by wealthier drinkers to wine and spirits.

The SAB bid values Bavaria at $7,8-billion, but the firm’s promotion of its long-term prospects appeared to be a crucial factor in securing the deal.

Bavaria’s controlling Santo Domingo family was clearly attracted by the chance to convert its 75% stake, almost in its entirety, into SAB shares.

”We married for beauty, not for money,” said Bavaria’s chairperson, Julio Mario Santo Domingo. The family will emerge with a 15,1% stake in SAB and the right to appoint two directors to the board.

Victory means SAB is now only fractionally behind InBev as the world’s biggest producer of beer by volume. InBev and SAB have now opened up a significant volume gap over the other two members of brewing’s big four — Heineken and Anheuser-Busch.

Bavaria is South America’s second-biggest brewer and enjoys market shares of 99% in Colombia and Peru.

Operating profits last year were $737-million, but Bavaria has already reported a 24% improvement for the first quarter of 2005 while growth in the second quarter was even higher.

Market analysts expect SAB to seek further acquisitions in South and Central America. — Â

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