SABMiller and Grolsch drink to £582m deal

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The Independent Online

SABMiller, the world's second largest brewer, has agreed to buy Royal Grolsch, the Dutch rival behind Grolsch lager.

In its second major move on the international market in as many months, after agreeing to combine its American operations with those of Molson Coors, SABMiller is offering ¿48.25 per share, 84.3 per cent above Grolsch's average closing price over the past month.

SABMiller, the brewer behind Miller Genuine Draft, Miller Lite and Peroni, said that the management of Grolsch supported the offer, which values the Dutch company at ¿816m (£582m). As with earlier deals, including its acquisition of Italy's Peroni and Germany's Beck's, SABMiller is paying a premium, offering almost 15 times the reported 2006 earnings before interest, tax, depreciation and amortisation.

The announcement, which comes just after the UK-based Scottish and Newcastle rejected a bid by Denmark's Carlsberg and Heineken, another Dutch brewer, is further evidence of the trend toward consolidation in the global brewing industry.

SABMiller hopes to employ the Grolsch Premium Pilsner brand across Africa and Latin America, using it to tap into the lucrative premium segment of the market in those regions. In South Africa in particular, analysts expect the new member of the SABMiller family to help plug the gap after Heineken terminated SABMiller-subsidiary South African Breweries' licence to manufacture and distribute Amstel lager beer.

Ab Pasman, chief executive of Grolsch, said that instead of pursuing its own strategy, there was "greater value" for his company in this deal. "In addition to financial considerations, it was important for us to give a lot of attention to the interests of our employees, customers and our home region. When we were asked to consider SABMiller's proposal, the key question was if greater value could be achieved than through our own existing strategy," he said. "Since this appeared to be the case, we entered into discussions and we believe that SABMiller's intended offer delivers benefits to all our stakeholders."

Yesterday's announcement also raised questions about SABMiller's position as a potential bidder for Scottish and Newcastle.

Trevor Stirling, a beverages analyst at Sanford C. Bernstein, said although he was almost certain SABMiller was interested in S&N, the balance of probability was against them making a bid. "Scottish and Newcastle doesn't really have a well-known exportable brand like Grolsch," he said, "If SABMiller were to bid, it would be for the Russian assets and the 50 per cent in BBH (Baltic Beverage Holdings)."

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