It is one of the most comprehensive leaks of a major deal the City has seen for years: a bid by Interbrew, producer of Stella Artois lager, for South African Breweries. The aim was to create the world's largest beer company, bigger even than America's Anheuser-Busch, famous for Budweiser and Michelob.
All the details were there and were said to be "circulating like confetti" in the City yesterday. Leaked documents prepared by Interbrew's advisers, Goldman Sachs and Lazards, showed that Interbrew planned to make an approach to SAB in December. The codenames added a dash of colour, with SAB dubbed "Zulu" and Interbrew called "Ice". There was even a warning in the document that the bid would face "potential Thistle interloper risk" – thought to be a reference to a possible counter bid by Scottish & Newcastle, the brewer of Newcastle Brown Ale.
And there was an obscure reference to the Interbrew bid for SAB acting as a block to SCAR – a reference to a possible three-way tie-up between Scottish & Newcastle, SAB and Miller Brewing of the US.
Goldman Sachs declined to comment on how the 44-page document ended up in the hands of several newspapers yesterday, though it is thought all its documents on the subject are accounted for. Lazards also declined to comment.
The leak forced Interbrew to make a statement. "Interbrew confirms that it has undertaken a preliminary analysis of SAB as part of its routine annual review of the leading brewers of the world," it said. "Interbrew confirms that the analysis, which is at a very preliminary stage, may or may not lead to an offer for SAB at some time in the future but can confirm that no approach has been made on the matter."
SAB declined to comment though it is thought that the company would not welcome an approach from Interbrew. SAB shares soared 8 per cent to 478p on the speculation, valuing the company at £3.8bn.
The leaked documents raise several issues. Firstly, who leaked them and what was their motive? Secondly, the potential bid puts the spotlight on the brewing sector, where all the major players are seeking to consolidate a fragmented global business.
On the first point there are several possibilities. The documents could have been left in a taxi or restaurant and picked up by a third party who saw a way of making a quick buck. However, several of the documents arrived at their destinations in unmarked envelopes, bearing a Paris postmark. Or there could have been a split between Goldmans and Lazards, with individuals at one of the banks deciding to scupper the deal.
What does seem clear is that the leaker has interpreted the original document for their own ends. The original draft recommends a nil-premium merger, whereas the leaker has included an apparently bogus "executive summary", detailing a £4.6bn bid. The original recommends no formal timetable whereas the "summary" includes specific dates. "It seems pretty clear that someone wanted to derail this thing before it had even got off the ground," one observer said.
There is no doubt that consolidation is on the minds of the world's largest brewers. Interbrew, currently the fourth-largest brewer, has been on an acquisition binge, which has seen it swallow Bass Brewers and Whitbread in the UK as well as Becks, the German lager. It has since been forced by the UK government to dispose of Carling, Bass's biggest brand with several venture capital firms as well as SAB and Heineken tipped as possible buyers.
Elsewhere Scottish & Newcastle has gulped down Kronenbourg. And South African Breweries listed on the London stock market two years ago, to raise capital for deals that would enable it to break out of its core South African market where it has a 90 per cent market share. It has been snapping up brands in emerging markets such as Pilsner Urquell in the Czech Republic as well as others in China and India.
SAB is expected to announce another major deal alongside its interim results yesterday. Kaiser, a Brazilian brand, is thought to be its $500m target.
Would a deal between Interbrew and SAB make sense? The leaked documents say the benefits would include fitting Interbrew's strong brands in mature markets with SAB's presence in emerging markets in eastern Europe and Latin America. The list of brands would include Stella Artois, Tennents and Becks from Interbrew, with SAB's market-leading South African brands like Castle and Lion.
The weaknesses would include limited synergies as the two groups have limited geographic overlap. Interbrew might also be deterred by the risks of a deal with SAB. As one analyst put it: "There would be a political risk of a foreign buyer acquiring what is basically a monopoly in South Africa. Its earnings are mostly in South African rand, which is a weak currency and its customers in South Africa are being decimated by the Aids epidemic."
The irony is that the benefits of the quest for global standing might prove illusory. Brewing has traditionally been a regional business. Consumer tastes vary substantially and distribution accounts for a large proportion of the costs. Even some mature markets remain fragmented such as Germany, which has 1,200 brewers.
Analysts say there are three main prizes in the quest for global scale. The first is the desire to develop truly global brands, which can be pumped through a global distribution system with economies of scale in areas like advertising and marketing. There are still few genuinely global brands. Even a beer like Budweiser is not truly global despite being known worldwide.
Second is the scope for synergies if there is geographic overlap. For example, this was a major part of the Scottish & Newcastle acquisition of Scottish Courage. Thirdly, global expansion offers entry into emerging markets in eastern Europe and Latin America which are volatile but potentially lucrative.
The Interbew document shows how keen it is to play the global game. Its rivals will now be plotting even more furiously to beat them to it.
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