/ 12 October 2005

SABMiller completes $7,8bn Bavaria takeover

United Kingdom- and South Africa-listed SABMiller plc has completed its $7,8-billion acquisition of a controlling 71,8% interest in Bavaria SA, South America’s second-largest brewer, the company announced on Wednesday.

The merger creates the world’s second-largest brewing company by volume, with annual beer volumes of 175-million hectolitres, net revenues of $12,5-billion and earnings before interest, taxation, depreciation and goodwill amortisation of $3,5-billion.

SABMiller now leapfrogs United States rival Anheuser-Busch, which moves into third place by volume, but remains behind Belgium’s Inbev.

News of a potential transaction was first mooted in February this year after Bavaria’s controlling shareholder, Colombia’s Santo Domingo Group (SDG), made known its wish to sell part of its stake. The news sparked a lengthy bidding process among several international brewers, for which SABMiller had always been considered one of the front-runners, along with Dutch giant Heineken.

SABMiller issued 225-million new ordinary shares to the value of $3,5-billion to SDG to fund its acquisition partly, resulting in SDG owning an economic interest of 15,1% in SABMiller. This makes SDG SABMiller’s second-largest shareholder behind Altria Group, and its stake is subject to a five-year lock-up, with certain exceptions.

SDG is controlled by Colombia’s well-known Santo Domingo family, and two representatives will sit on the SABMiller board.

SABMiller said on Wednesday the 225-million ordinary shares in SABMiller plc issued to SDG in consideration for the merger, as well as the 167 411 024 ordinary shares arising on the conversion of the remaining convertible low voting participating shares held by Altria Group, have been admitted to the official list of the Financial Services Authority and to trading on the London Stock Exchange, as well as to listing on the JSE.

Graham Mackay, CEO of SABMiller, said: “We are delighted that Bavaria is now part of the SABMiller group. This transaction reaffirms SABMiller’s superior growth profile within the brewing industry and we look forward to working with our new partners and colleagues.”

SABMiller estimates the combined group can achieve annual cost synergies and operating improvements totalling about $120-million by March 2010. It also expects substantial profit improvements from revenue-enhancement initiatives over the same five-year period.

As South America’s second-largest brewer, Bavaria has dominant market positions in Colombia (99% of the beer market), Peru (99%), Ecuador (93%) and Panama (79%), where its key brands are Águila, Cristal, Pilsener and Atlas, respectively.

The merger now gives SABMiller a leading position in South America, in addition to its existing strong positions in the US, Europe, Africa and Asia, establishing SABMiller as a leading brewer across five continents.

Mackay has said that SABMiller would very likely be introducing some of its own international premium beer brands into Bavaria’s territory, with Miller Genuine Draft being a prime candidate. — I-Net Bridge